Louisville into southern Indiana

Live in Kentucky, work in Indiana (2026)

Whether the two states have a reciprocity agreement, which form stops the withholding, and what your paycheck actually looks like after both states and any local tax have taken their share.

Is there a reciprocity agreement?

Yes. Kentucky and Indiana have a reciprocity agreement, so Indiana takes $0 of state income tax. File IN Form WH-47 with your employer. Indiana's county tax is not covered though: Clark County, IN charges $2,000 at $100,000, and it is owed in full.

Crossing the Ohio River from Louisville into southern Indiana comes with an agreement and an asterisk, and the asterisk is written into Indiana's own guidance. The agreement is real: file Form IN Form WH-47 with your Indiana employer and Indiana's state income tax stops, leaving its claim on your wages at $0. Kentucky taxes you at $3,382 instead. The asterisk is that Form WH-47 exempts you from Indiana's state tax and nothing else at all. Indiana's counties levy an income tax of their own, and for someone who lives outside the state it attaches to the county where you principally work. Clark County, IN therefore charges you $2,000 at $100,000, and your reciprocity certificate does not touch it. On the other side of the river, Louisville collects $0, because its occupational tax only ever reaches wages that were earned inside Jefferson County. On balance the commute saves you $200 a year.

At $100,000 single filer, against working at home in Kentucky

This commute saves you $200 a year. Take-home is $73,798, against $73,598 working at home.

Computed from the tax engine with 2026federal brackets, FICA, both states' income tax, and any local tax at either end. Standard deduction, no pre-tax contributions.

Who taxes you, and how much?

Single filer at $100,000, 2026 rules.

Tax	Amount
Indiana income tax (work state)	$0
Kentucky income tax (resident state)	$3,382
Combined state income tax	$3,382
Clark County, IN local tax	$2,000

How the Kentucky and Indiana rule works

Indiana's county tax has an unusual rule for out-of-state workers, and it is the whole story here. For an Indiana resident the county tax follows where they live. For someone who lives outside Indiana, it follows the county where their principal workplace sits, and the rate charged is the same one a resident of that county pays. There is no lower nonresident rate; Indiana abolished that distinction. So Clark County, IN bills you at 2%, exactly as it bills its own residents. Kentucky's occupational tax runs on the opposite principle, reaching only wages earned within the jurisdiction, so Louisville's claim on your Indiana wages is $0. The rates happen to fall in your favour here, but only just, and a job in a higher-rate Indiana county would reverse it. Check the county your workplace is actually in, because the ninety-two of them charge very different rates and the margin here is thin.

The local tax the agreement does not cover

Indiana's county income tax survives the agreement. Your Indiana state tax is $0 and your Clark County, IN tax is $2,000, at the same time. Indiana's own guidance is explicit that WH-47 covers state tax only and that the county tax may still be withheld on the county of principal employment. Louisville, for its part, charges $0, since its occupational fee applies only to wages earned inside Jefferson County and yours were not.

What this estimate covers

These figures apply 2026 federal brackets after the standard deduction, FICA, Kentucky's income tax, Indiana's income tax where the agreement does not remove it, and the local tax at each end of the commute. State-administered payroll programs such as disability and paid family leave follow the work state, so where Indiana runs them they come out of your check on Indiana's schedule rather than Kentucky's. They assume every workday is spent in Indiana and all of your wages are earned there.

One limit is worth naming. A split week, with some days worked from home, is not modelled: the credit, the local tax and the work-state payroll programs would each be apportioned across the two states, and this estimate treats the whole year as Indiana work.

Living in Kentucky and working in Indiana: FAQ

Does Indiana tax Kentucky residents?

Not at the state level. The agreement means Indiana's state income tax on your wages is $0, once Form IN Form WH-47 is on file with your employer. Indiana's county income tax is a separate levy that the agreement does not cover.

Do I pay Indiana county tax?

Yes. For someone living outside Indiana, the county tax attaches to the county where you principally work, at the same rate its own residents pay. Clark County, IN charges you $2,000 at $100,000, and WH-47 does not exempt you from it.

Is there a lower nonresident county rate?

No. Indiana used to run a lower rate for nonresidents and abolished it. You pay the county's single rate of 2%, exactly what a resident of that county pays. Where your job sits therefore matters more than it used to.

Does Louisville still tax me?

No. Louisville's occupational tax reaches only wages earned inside Jefferson County, and yours were earned across the river in Indiana. Its claim on those wages is $0. This is why the local side of the commute can work out in your favour at all.

Am I better off overall?

Slightly. The commute saves you $200 a year at this salary, because the county rate happens to sit just below Louisville's own occupational rate. The margin is thin, and a job in a higher-rate Indiana county would wipe it out completely.

Which form do I file?

Form IN Form WH-47, which Indiana requires to be notarised and which your employer keeps on file. It stops Indiana state withholding and nothing else. Your employer will still withhold the county tax, and that is correct rather than a payroll error.

This estimate is for planning purposes only and does not constitute tax or financial advice. Actual paycheck withholding depends on your employer's payroll system, custom W-4 elections, additional income, and personal tax situation. For specific tax-planning decisions, consult a licensed CPA or tax professional. Cross-state estimates additionally assume all wages are earned in the work state and exclude any apportionment of remote workdays.

How This Page Is Reviewed

The Kentucky to Indiana commute rule is taken from each state's own reciprocity guidance and withholding forms, and is reviewed against those primary sources before each tax-year update. Local tax figures come from the municipal research files behind the city pages.

Reviewed by

PaycheckCalc Research Desk

Last reviewed

2026-07-14

Primary sources