Yes. You likely will
get back most, if not all, of your Indiana
local tax paid. While Indiana and
Kentucky do have a reciprocal
agreement that states that you only pay state
tax where you live (Indiana), the same agreement does not apply to the local taxes paid. However, Indiana does allow you to claim a credit on the amount of local taxes you
pay to another state to offset the local taxes you would have to pay in
Indiana.
Let’s say, for example, that upon doing your return, your
local Indiana tax liability is $1000.
Since you paid $1450 to a KY locality, you will receive a credit for
what you paid, giving you a net IN local liability of $0. You will not get a refund on the $450 “extra”
paid to the KY locality, but you will be refunded the $650 you paid to Indiana. If, on the other hand, your IN liability were
$1600, your KY local tax credit would bring this amount down to $150. You would receive a $500 refund from the
local tax portion of your return.
Keep in mind, however, that this amount is only on the local tax portion of your return. If you owe on the state tax portion, the amount of your refund will be reduced
accordingly. On the other hand, if you
are due a state tax refund, this local portion is added to it.
To do this in TurboTax:
Open your
return with your login and click Take Me
to My Return
Click on
the States tab in the left-hand
column and select the Indiana return.
Navigate to
the Indiana Taxes and Credits screen
Select Start on the line Credit for Non-Indiana Local Taxes (see
screenshot at the end of the answer)
Answer the
appropriate questions on the next screens
When finished, you will see that the credit will be
applied, and your refund will go up accordingly.
ALSO NOTE: Unless KY
state
tax (not local tax) was withheld from your wages, you will
not need to file a KY return of any
kind.
If Kentucky tax was withheld, file form WH-47 with your employer so that KY taxes won't be taken out in the future (just IN taxes).
[Edited 01/13/18 | 3:33 PM PST]
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