Yes. Kentucky taxes unemployment so you owe tax on your IL unemployment. However you can claim a credit on your KY return for tax paid to IL on the unemployment.
IL and KY have a reciprocal tax agreement. An IL employer will withhold IL tax on a KY resident working in Illinois so the Kentucky resident normally does not have to file a IL return.
However this agreement does not cover unemployment so your IL unemployment is taxed by both IL and KY. This double-tax allows you to claim a credit on your KY return for IL tax paid.
- In the Kentucky section of TurboTax, go to Credit for Tax Paid to Another State
- Say Yes to Did you earn income in another sate in 2021?
- Select Work on Credit on About Credit for Tax Paid to Another State
- Say Yes to Tax Return Filed With Other State
- If you do not see Illinois, add IL
- On Income Earned in Illinois, you should see an amount for your unemployment. If not, enter your unemployment amount and Unemployment for Type(s) of income earned.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
