Kentucky Tax Reciprocity States

Montana has tax reciprocity with North Dakota. North Dakota residents who work in Montana can apply for an exemption from Montana state income tax withholding. According to the Tax Foundation, participating states have the following income tax rates: Kentucky (2-6%), Illinois (3% of federally adjusted gross income), Indiana (3.4% of federally adjusted gross income), Michigan (4.35% of federally adjusted gross income), Ohio (0.58-5.9%), Virginia (2-5.75%), West Virginia (3-6.5%) and Wisconsin (4.6-7.75%). Please note that you may still be subject to district tax on the income you earned as a non-resident. According to Indiana Informational Bulletin #33, “Indiana`s reciprocity agreements do not affect withholding tax with respect to Indiana County Adjusted Gross Income Tax (CAGIT), County Economic Development Income Tax (CEDIT), or County Options Income Tax (COIT).” Arizona has reciprocity with a neighboring state – California – as well as Indiana, Oregon and Virginia. If your employee works in Illinois but lives in one of the mutual states, they can file Form IL-W-5-NR, Declaration of Employee Non-Residency in Illinois, to be exempt from Illinois state income tax. States that are signatories to reciprocal agreements have what is called fiscal reciprocity among themselves, which alleviates this problem. You don`t need to file a tax return with D.C. if you work there and you`re a resident of another state. Submit the D-4A exemption form, the “Certificate of Non-Residency in the District of Columbia,” to your employer.

Unfortunately, it only works the other way around with two states: Maryland and Virginia. You don`t need to file a non-resident declaration in one of these states if you live in D.C. but work in one of these states. Tax reciprocity is an agreement between states that reduces the tax burden on workers who commute to work across state borders. In tax reciprocity states, employees are not required to file multiple state tax returns. If there is a mutual agreement between the State of origin and the State of work, the employee is exempt from state and local taxes in his State of employment. New Jersey has only reciprocity with Pennsylvania. This applies to employees who live in Pennsylvania and work in New Jersey. Michigan has reciprocal agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio and Wisconsin.

Submit the MI-W4 exemption form to your employer if you work in Michigan and live in one of these states. Indiana, Wisconsin, Michigan, Ohio, Virginia, West Virginia and Illinois all have reciprocal tax treaties with Kentucky. The agreements cited in 103 KAR 17:140 exempt persons residing in those states from paying Kentucky income tax on income earned in Kentucky. To be eligible for D.C. reciprocity, the employee`s permanent residence must be outside of D.C. and the employee cannot reside in D.C. for 183 days or more per year. Kentucky has reciprocity with seven states. You can file Exemption Form 42A809 with your employer if you work here but are located in Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin.

However, Virginia residents must travel daily to qualify, and Ohio residents cannot be shareholders of 20% or more in an S-Chapter company. Wisconsin states with reciprocal tax treaties are: You don`t pay taxes on the same money twice, even if you don`t live or work in one of the states with reciprocal agreements. You just need to spend a little more time preparing multiple state tax returns, and you`ll have to wait for a refund for taxes that have been unnecessarily withheld from your paychecks. Iowa has reciprocity with only one state – Illinois. Your employer does not have to deduct Iowa state income taxes from your wages if you work in Iowa and are an Illinois resident. Submit the exemption form 44-016 to your employer. Kentucky exempts workers in some neighboring states from paying state income taxes on money earned in Kentucky. The Commonwealth has reciprocal agreements with seven different states and has recognized that some people work in Kentucky but remain residents of other states. These people only have to pay the income taxes of their home state. Does your employee work in North Dakota and live in Minnesota or Montana? If the answer is yes, they can complete Form NDW-R, Exemption from Reciprocity from Withholding Tax for Qualified Residents of Minnesota and Montana Who Work in North Dakota, for Tax Reciprocity. The reciprocity rule applies to employees who must file two or more state tax returns – a resident return in the state where they live and a non-resident tax return in other states where they might work so that they can recover any taxes that have been wrongly withheld. .