Moved to Ohio from Kentucky in October, worked in Ohio all year

[Steven27]

I was a resident of Kentucky and moved to Ohio in October, but worked in Ohio for the entire year.  I’m trying to file both Kentucky and Ohio as a part-year resident.  I have split the income between the two states based on the date we moved.  When I run the final review, the program gets stuck on Schedule A: line 12 and notes that to qualify for this deduction I must be a resident of Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia.  The amount input in that field is the money earned for the time I lived in Kentucky.  How do I fill this field out or what am I doing wrong?  When I review the Ohio forms it appears it’s still trying to put our full federal adjusted gross income in for Ohio, but the amount listed on the Kentucky forms seems to be correct.        

[JotikaT2]

It depends.

Kentucky and Ohio have state reciprocity.  This means that even though you worked the entire year in Ohio, but you lived in Kentucky, your wages were only subject to income tax withholdings in Kentucky.

Review your state wages on your W-2 Form.  The income earned from Ohio while you were a resident of Kentucky should only have state withholdings in Boxes 15-17 for Kentucky even though they were earned from a job in Ohio.  Confirm the amount of Ohio wages and withholdings only reflects your income while you resided in Ohio.  

For Ohio, the amounts may be listed for the entire year, but you should have a Schedule of Credits which transfers the credit for your nonresident period to Form IT 1040, Line 9. The credit ensures you receive a credit for any income earned while a nonresident.

While Schedule A lists the information for the entire year, it is also allocated to your period of residence on Line 5 of your Form IT-1040.  This allocates the amount of you Schedule A items on the overall tax calculation as opposed to just the amounts listed on Schedule A.  

Review your Form IT-1040 to ensure the allocation is prepared according to the period of residency and nonresidency.  If the overall amounts are allocated, your return will be correct as long as your input is accurate.

[Hal_Al · Accepted solution]

The reciprocity rule  does not apply in your case.  It's only applicable if you were a full year resident  of KY.   That is,  line 12, of Schedule A,  is not used , in your case. 

You file a part year resident KY return and pay tax on your income up until the day your moved.

You also file a part year resident OH return.   

Ohio does a convoluted tax calculation for non-residents/part year residents. It calculates tax on total income, then it calculates a non resident/part year resident credit, which it subtracts from the tax it calculated on the total income. The credit is calculated as your non-Ohio income divided by Total adjusted Income multiplied by the total tax. TurboTax (TT)   does this by allocating your income as either Ohio or non-Ohio.  W-2 income is normally  allocated by the state name abbreviation shown in box 15 of your W-2.  Because all your wages were earned in OH, your wages are  all OH income even though your W-2 may say it's KY income (or some of it is KY income).* TT will ask you, item by item, in the state section, how much of your other income is Ohio or non-Ohio income. 

OH then gives you a 2nd  credit (or partial credit) for the wage income also taxed by KY.  That is, you will have  credits on both line 28 (non resident credit) and line 33 (resident credit) of the Ohio Schedule of Credits.  

*Also be advised that you will probably have to use a work around in TT.  At the w-2 screen split the boxes 15-20 W-2 info into 2 lines. On the 1st line leave KY in box 15 but make box 16 blank or 0; leave the KY withholding in box 17. On the 2nd line put OH in box 15 and all the state wages amount in box 16; box 17 will show the OH withholding, if any.