State taxes...i live in Indiana and work in Ohio

[TomD8 · Accepted solution]

If you work in Ohio and are a full-year resident of Indiana, you do not have to pay Ohio income tax on your W-2 wages.  The two states have tax reciprocity.  For tax purposes, your Ohio wages are considered Indiana income, and are fully taxable by Indiana.  In TurboTax Personal Info, you would answer No to the question about earning income in another state.  Tax reciprocity applies only to W-2 wages, not to other types of income.

However, if your employer mistakenly withheld Ohio state taxes from your pay, you'd have to file an Ohio non-resident tax return (showing zero Ohio income) in order to get those taxes refunded.  And if that's what's happening, you should also file Ohio Form IT-4NR with your employer.  Here's a link to that form:  http://www.onu.edu/files/wth_it4nr.pdf0_.pdf

[sray454]

Thanks for the Information!!

[luvarnie]

So, I live in Ohio and I work full time in Indiana.  My W-2 says that I paid state taxes.  I'm assuming that would be to Indiana????  I'm working on my Ohio state tax return (I'm joint filing with my husband) and as of right now I owe the state of Ohio $1500!!!!!!!  I'm not sure what to do.

[MayaD]

Your w-2 box 15 has the state to which the state income tax was withheld. 

If it is for Indiana, you will need to file as a non-resident for a refund of the Indiana taxes.

You will also file Ohio resident return and report all you income. You will have an amount due since you didn't have any taxes withheld for Ohio.

Ohio and Indiana have a reciprocal state agreement that allows a resident of one state to request exemption from tax withholding from the other (reciprocal state).  You can ask you employer to stop withholding Indiana taxes to avoid this in the future.

[Hal_Al]

IN has a specific form (IT-40RNR) for a reciprocal state refund. Rather than paying TurboTax for IN software, you should try filing that form by hand. It looks pretty  simple. Get it here: http://www.in.gov/dor/4733.htm

The reciprocity agreement does not apply to local city & county  taxes (box 19 of the W-2).  You can not get those refunded, but if you live in an Ohio city with a tax, they may give you a credit or partial credit. Many do.  You need to check with your city.

If you are subject to Ohio School District Income Tax (SDIT), you can not get a credit, for IN county taxes paid, on an SDIT return.

[catcarbab]

Does this apply to city taxes as well?  I get different answers from Indiana and Ohio tax centers.  Some say I have to pay city tax in Ohio, some say reciprocal applies to ALL taxes.  

[Vanessa A]

No, reciprocal agreements to not apply to ALL taxes.  The state reciprocal agreements only affect the state returns, not the city or local. Municipalities get to make their own tax rules. So you will need to contact the city for where you live and the city for where you work.  You may find that one allows you to take a credit for taxes paid to the other, but you may also find that they have their own rates and give no breaks.  

[Hal_Al]

@catcarbab  If you are an IN resident and work in an OH city, your employer should be taking out City income tax. You can not get that refunded.  It is not covered by the reciprocal agreement.  But, you do not have to file a city tax return.

Most  IN counties (but not the state)  allow a credit, or partial credit for tax paid to an OH city. That will come up in the IN state interview. (For details, see:

https://ttlc.intuit.com/community/state-taxes/discussion/i-see-no-separate-question-for-school-taxes...

[sean_the_bean]

Same situation: live in Indiana, work in Ohio. Would be nice if TurboTax automatically told you you don't have to file a separate return for the state where you work when they have a reciprocal agreement. That seems pretty basic. (Rather than answering "no" to the question "Did you earn money in another state?" Which feels a lot like a white lie, even if that's what you're supposed to do.) I wasted about 20 minutes trying to figure what to do with questions about Ohio taxes that didn't seem relevant to my situation before I Googled it and found this forum.

Thank you for the help, @TomD8!