No. You only have to file a resident Indiana return. You do not have to file a nonresident Kentucky return (740 NR).
Kentucky has reciprocal agreement with the state of Indiana, which means that all salaries, wages, tips, and commissions earned in Kentucky by an Indiana resident must be reported as if they were earned in Indiana. A credit cannot be taken for any taxes withheld by or paid to any of these states in connection with income from salaries, wages, tips, and commissions. If taxes have been withheld or paid to Kentucky, a claim for refund should be filed with that state by filing a Kentucky tax form for nonresidents.
As far as the local taxes withheld, If you work in Kentucky and live in Indiana, you may get a credit or partial credit on your Indiana return for paying local tax to the Kentucky. This will depend on the rules and regulations of your resident county. If they do allow the credit, then you will see it on your interview screens when you are going through your Indiana state tax return.
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