Live in Indiana, work in Kentucky
State income tax on wages · single filer · tax year 2026
Kentucky takes
$0
on wages earned there
Indiana takes
$1,741
after the credit it gives
Both together
$1,741
state tax for the year
Cost of the line
$0
a year, above working at home
What crossing the line costs
agreementKentucky does not tax you at all — the two states have an agreement, and you file a certificate with your employer. Solid is what you actually pay; the faded part of the Indiana bar is the credit it hands back. State income tax only — federal and payroll tax apply on top, and a city wage tax may too.
Which state taxes you, and what it costs
- Of all the ways two states can handle a commuter, this is the kindest. Indiana and Kentucky have agreed that only your home state taxes your wages. Your bill is $1,741, the same as someone working down the road from their house. Hand your employer the non-residence certificate, named in the panel beside this page, so Kentucky knows not to withhold.
- More people make this crossing than any other into Kentucky. About 64,171 jobs there are held by people living in Indiana — the biggest of the 5 routes of this size into the state. Whatever this page says about the tax, it is describing a very well-worn road.
- Indiana and Kentucky hold a reciprocity agreement covering wages, so Kentucky does not tax this commuter at all and no resident credit is needed. The commuter files the work state's non-residence certificate with the employer — it is named in the panel beside this page — which stops Kentucky withholding at source, and owes Indiana alone — $1,741 at the reference salary, identical to an earner who never crosses the line. ⚠️ The agreement covers WAGES. Other income sourced to Kentucky is outside it, and an employee who does not file the certificate has Kentucky tax withheld and must reclaim it on a non-resident return.
- Measured against every other state sending commuters into Kentucky, this is the largest single flow: 64,171 jobs held by Indiana residents, ahead of all 5 corridors of this size into that state. Census LODES counts jobs rather than people, so a worker holding two positions in Kentucky appears twice.
Where the money goes
A $75,000 salary
- Federal income tax$7,670
- Social Security and Medicare$5,738
- State income tax$2,183
- Yours$59,410
| Federal income tax10.23% | $7,670 |
|---|---|
| Social Security and Medicare7.65% | $5,738 |
| State income tax2.91% | $2,183 |
| Yours79.21% | $59,410 |
Which rung you are on
A $75,000 salary
| This rung starts at | $66,500 |
|---|---|
| Next rung starts at | $121,800 |
| Room before it | $46,800 |
Federal only, measured on gross pay — so the first rung is what the standard deduction covers.
The arithmetic, step by step
| Kentucky takes, on wages earned there | $0 |
|---|---|
| Indiana charges its residents | $1,741 |
| Less the credit Indiana gives | $0 |
| Total state tax | $1,741 |
| If you also worked in Indiana | $1,741 |
| Difference | $0 |
On a reference salary of $60,000 a year, single filer. Both states run progressive schedules, so the figures do not simply scale — use the tool above for your own salary.
What this page does not cover
- One thing this page leaves out: city taxes. Some cities charge their own tax on people who work there, and it sits on top of everything above. Philadelphia is the well-known one. New York City only charges its own residents, so commuting in adds nothing. Check whether the city you work in is one that charges, because the Kentucky state figure is not the whole story if it does.
- Two assumptions sit under this page. First, that Kentucky is where all your pay comes from. Second, that you go there rather than working from your kitchen in Indiana. Mixed income changes how the credit is worked out, and remote days have their own rules in some states.
- Sixty thousand a year is the assumption behind these amounts, chosen because nobody publishes average pay for a route between two states. At your own salary the numbers shift. The conclusion about which of Indiana and Kentucky takes more usually does not, but the size of the difference can.
- These figures cover the STATE layer only. City and municipal wage taxes sit on top of them and are not included: a commuter into Philadelphia pays its wage tax on top of anything here, and Ohio's municipalities run their own credit system, which this site models in its own families. New York City, by contrast, taxes only its residents, so a commuter into it adds nothing at the city level. Whether Kentucky or Indiana carries a local layer is a separate question from the state arithmetic above.
- The arithmetic assumes all wages are earned in Kentucky and that there is no other income. That matters for the credit: where income comes from several states, Indiana limits the credit to the share of its own tax attributable to the Kentucky portion, computed as a ratio rather than the straightforward cap used above. It also assumes days are worked in Kentucky rather than remotely — several states tax a non-resident's remote days as though they were worked at the employer's location, which reverses the usual expectation and is handled on this site's reciprocity pages.
- Dollar amounts are computed at a stated reference salary of sixty thousand rather than a corridor wage average, which no published source provides per state pair. Because both states' liabilities and the credit between them are functions of the same income, the direction of the Indiana to Kentucky comparison holds at other salaries even though the amounts do not — with one qualification worth stating, that a progressive schedule can change the SIZE of the gap at higher incomes, and in Kentucky's case a bracket crossed on one side and not the other is exactly where that happens.
Questions people ask
Do I pay state tax twice, to Indiana and Kentucky?
Not twice over. Both states have a claim — Kentucky because you earn the money there, Indiana because you live there — but Indiana gives you credit for what Kentucky took. The credit stops at what Indiana would have charged on its own, so what you actually pay is the bigger of the two bills. Here that comes to $1,741 for the year.
Does working in Kentucky cost me anything extra?
No. The state line is real on a map and invisible on your pay stub here. Your total is $1,741 either way. Keep the paperwork in mind though: crossing a line usually means filing twice even when it changes nothing.
What do I give my employer so Kentucky stops taking tax?
You hand your employer a certificate saying you live in Indiana. That is what switches Kentucky withholding off. Skip it and nothing is lost forever, but you will be filing in Kentucky to get the money back.
Do I have to file tax returns in both Indiana and Kentucky?
Usually yes, and it catches people out. Indiana wants a return because you live there. Kentucky usually wants one too, because you earned money inside it — even in the cases where you end up owing it nothing. Filing in a state and paying it are separate things, and the return is often what proves you do not owe.
What if I work from home in Indiana some days instead of going to Kentucky?
Normally, days worked at home in Indiana belong to Indiana, and only the days you spend in Kentucky are taxed there. That is the ordinary rule. The exception is real though: some states count your remote days as worked at the employer's location anyway. That flips the answer completely, so check Kentucky's rule rather than assuming.
How is liability allocated between residence and work state on the same wages?
Both jurisdictions assert a claim on the same wages — Kentucky on a source basis, Indiana on residence. The residence state grants a credit for tax paid to the source state, limited to the residence state's own liability on that income. Net combined liability therefore equals the greater of the two liabilities rather than their sum, $1,741 at the reference salary, and the split between the two treasuries is the only thing the credit changes.
Why is the marginal state-tax cost of this crossing zero?
Marginal cost is zero because the binding liability is the residence state's. Indiana's own charge on this income equals or exceeds Kentucky's, so the resident credit absorbs the source-state tax entirely and combined liability equals residence-only liability, $1,741. ⚠️ Zero marginal tax is not zero obligation: a non-resident return may still be required in Kentucky.
What administrative step gives effect to the reciprocity exemption?
The exemption is self-executing only on filing: the employee furnishes the work state's non-residence certificate to the employer, which relieves the employer of the obligation to withhold Kentucky tax. Absent the certificate the employer withholds, and the employee recovers the amount by filing a Kentucky non-resident return — the liability position is identical, the cash-flow position is not.
What filing obligations arise in each state on this corridor?
Generally two. Indiana requires a resident return reporting all income; Kentucky requires a non-resident return reporting the income sourced to it, which is also the mechanism by which the resident credit is substantiated. ⚠️ A filing obligation is distinct from a liability: a reciprocity exemption or a zero net position removes tax without necessarily removing the return, and the non-resident return is frequently what establishes the credit claimed on the resident one.
How do remote working days affect sourcing between these two states?
Ordinarily wages are sourced to where the services are performed, so days worked remotely from Indiana fall outside Kentucky's jurisdiction and the source-state apportionment shrinks accordingly. ⛔ The exception is the "convenience of the employer" rule, which several states apply: a non-resident's remote days are sourced to the employer's location unless the remote work is required by the employer rather than chosen by the employee. The figures on this page model in-person attendance in Kentucky throughout.