Questions & Answers

Is my income taxable by Kentucky if I'm a resident of a reciprocal state?

Kentucky has reciprocal agreements with specific states. These agreements provide for taxpayers to be taxed by their state of residence, and not the state where income is earned. Reciprocity does not apply to persons who live in Kentucky for more than 183 days during the tax year. The states and types of exemptions are as follows:

  • Illinois, West Virginia-wages and salaries
  • Indiana-wages, salaries and commissions
  • Michigan, Wisconsin-income from personal services (including salaries and wages)
  • Ohio-wages and salaries. Note: Wages which an S corporation pays to a shareholder-employee if the shareholder-employee is a "twenty (20) percent or greater" direct or indirect equity investor in the S corporation shall not be exempt under the reciprocity agreement.
  • Virginia-commuting daily, salaries and wages

Taxpayers who qualify for this exemption and have no other Kentucky taxable income should file Form 740-NP-R , Kentucky Income Tax Return, Nonresident-Reciprocal State, to obtain a refund. Also, nonresidents who qualify for the exemption should file Form 42A809 , Certificate of Nonresidence, with their employer to exempt their future wages from Kentucky withholding.

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