KY-WI Tax Reciprocity 2026

KY and WI share no border - the agreement mostly benefits remote employees on a payroll in the other state.

Quick answer: Yes - KY and WI have a reciprocal tax agreement. KY residents working in WI file form W-220 and pay only KY tax (3.5% flat in 2026). WI residents working in KY file form 42A809 and pay only WI tax.

How It Works Both Directions

ScenarioForm To FileResult
Live KY, work WIW-220 (to skip WI)No WI withholding. Pay KY tax only.
Live WI, work KY42A809 (to skip KY)No KY withholding. Pay WI tax only.

Worked Example

Sam lives in Bowling Green KY, works remotely for a Milwaukee employer, earns $64,000. With reciprocity: he files W-220. WI withholds $0. KY withholds ~$2,240 (3.5% flat). He files only a KY-740. Without the form: WI would withhold at its graduated rates (well above KY’s 3.5%), and he would chase a WI nonresident refund the next spring while still owing KY in full.

Step-by-Step: Claim the Exemption

  1. Download the work-state exemption form (WI form W-220 for KY-residents-working-in-WI; KY form 42A809 for WI-residents-working-in-KY).
  2. Fill in name, SSN, home address (must be in the reciprocity state), and current date.
  3. Submit to HR/payroll at your employer.
  4. Verify on your next paystub that work-state tax withholding is $0.
  5. Update your home-state W-4 to make sure you withhold enough for full income tax.
  6. File only a resident return in your home state next April (unless you have non-wage work-state income).

OBBBA 2026 Note

OBBBA 2026 (One Big Beautiful Bill Act) raised the federal SALT cap to $40,000. This matters for reciprocity commuters who itemize: your full home-state income tax is now more likely to be fully deductible on federal Schedule A, making the state-level tax difference between your home and work state a real after-tax driver of commute value. Check each state rate: KY top rate 3.5% flat (2026), WI top rate 7.65% top.

FAQ

Which form does a Kentucky resident working in Wisconsin file?

File WI form W-220 (Nonresident Employee’s Withholding Reciprocity Declaration) with your Wisconsin employer. WI withholding stops; you withhold Kentucky tax instead.

Which form does a Wisconsin resident working in Kentucky file?

File KY form 42A809 (Certificate of Nonresidence). KY state withholding stops. KY local occupational license fees on wages earned inside Kentucky cities/counties still apply.

Why does the withholding direction matter so much for this pair?

The rate gap is large: KY is 3.5% flat (2026) while WI’s graduated rates reach 7.65%. A KY resident accidentally withheld in WI loans Wisconsin far more than the KY tax actually owed. Filing W-220 on day one keeps that cash in each paycheck.

Does Wisconsin have local income taxes?

No. Wisconsin has no county or municipal income tax, so W-220 removes all WI wage withholding. Kentucky residents may still owe their local KY occupational fee where the work is physically performed in Kentucky.

How do I fix a year where the wrong state withheld?

If WI withheld from a KY resident: file a WI nonresident return (Form 1NPR) claiming the wages exempt under reciprocity for a full refund. If KY withheld from a WI resident: file KY form 740-NP-R. Then file the correct exemption form with payroll.

Model Your Take-Home

See exact post-reciprocity paycheck with KY or WI withholding.

Paycheck Calculator →

Run the numbers for each state: Kentucky Income Tax Calculator · Wisconsin Income Tax Calculator

Other reciprocity pairs:
VA-KY · VA-WV · IL-WI · IL-IA · IL-KY · IL-MI · Full matrix

Tax calculations are estimates for educational and informational purposes only. This site does not provide tax, legal, or financial advice. Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. Data sourced from IRS publications and official state tax authority websites.

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