I work in one state and live in another. The state I live in once to tax my income like the state I work in. So I’m being double taxed. Is this right?

[Critter]

Which states ?

[jc-propertyllc]

Indiana is the state I live in Kentucky is the state I work. I filed a non resident in KY. Indiana wants money

[Hal_Al]

Yes, IN is correct, you owe IN tax on ALL your KY income (and all your other income too).

Indiana and KY are reciprocal states.  No KY state taxes are withheld or due and you normally do not need to file an KY return. But  IN will tax you on your KY income.

If KY taxes are mistakenly withheld, you have to file an KY return to get a refund. IN will not give you a  credit, in a reciprocal state situation. You should ask your employer to stop withholding so you don't have to file an KY return every year.

However the reciprocity agreement does not apply to local city or county taxes. You are not required to file a KY local return, but you are also not entitled to a refund of the city/county withholding (box19 on your W-2), unless there was an error in the amount. If you are subject to a IN county  tax. You should check to see if your IN Co. will give you a credit for the KY city tax withheld (most do, it's on the IN state return).

KY has a specific form (740 NP-R ) for a reciprocal state refund. Rather than paying TurboTax for KY software, you should try filing that form by hand. It looks pretty  simple.  <a rel="nofollow" target="_blank" href="https://revenue.ky.gov/Forms/740-NP-R%20Kentucky%20Individual%20Income%20Tax%20Return%20(Nonresident...>...

[Hal_Al · Accepted solution]

It only appears hat you are being double taxed. Your resident state CALCULATES tax on all your income. Then. it gives you a credit (sometimes only a partial credit) for the tax you paid to the other state.

It's important that you tell us which states you are dealing with. The rules vary. In particular, if you have a reciprocal state situation.

[Critter]

NO it is not correct ...  

You must file a non-resident  tax return in addition to your home state  tax return.

You'll be able to take a credit on your resident  return for taxes paid to the non resident state, so you won't be double-taxed.

In TurboTax, be sure to complete your non-resident state return before you do your home state return, so that the credit flows properly.

See this FAQ for more detailed instructions:  https://ttlc.intuit.com/questions/1901271-how-do-i-file-a-nonresident-state-return