enkhendrix
Level 1

Ohio/Michigan Reciprocity?

We moved from Ohio into Michigan at the end of June, making half of our wages taxable in each state, although our address was never changed at work and Ohio taxes were withheld for the entire year and nothing was withheld for MI.  The directions for Ohio 1040 Schedule A Line 12 says,

 

"Enter compensation amounts earned in Ohio during the portion of the year that you were a resident of Indiana, Kentucky, West Virginia, Michigan and/or Pennsylvania. Do not include any Ohio sourced business income, lottery or casino winnings, rental or royalty income, capital gains, or non-employee wages.  Exception: This deduction does not apply to compensation paid to you by a pass-through entity in which you have at least 20% direct or indirect ownership. R.C. 5733.40(A) (7)

reclassifies such compensation as a distributive share of income from the passthrough entity."  

 

So am I correct in thinking that the half year of wages should be entered on Schedule A Line 12, because Turbo Tax keeps telling me that this line should be blank.  It says to qualify for this deduction, you must be a resident of Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia, which we are.  What am I missing?

‎January 27, 2020 8:17 PM
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Hal_Al
Level 15
Level 15
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State tax filing

The reciprocal agreement does not apply to part year residents. It will apply in 2020 when you will be a full MI resident. You should not be using line 12, Schedule A. You will have to allocate your income between both states. What your're missing is that the OH instructions fail to clarify "you must be a FULL YEAR resident of Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia.

 

I assume you continued to working Ohio, after moving to MI. It gets complicated.  All your wages are taxable by Ohio and must be allocated to OH, since they were earned there. . The wages after moving are also allocated to MI.  MI will then give you a credit, or partial credit, for the OH tax paid on wages paid after the end of June.

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‎January 28, 2020 4:53 AM
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