It depends. You might not need to file a KY return at all, because Indiana and KY are reciprocal states and agree that you are only taxed in your home state of Indiana. Look at boxes 15-17 on your W-2, and see if there is a line for KY and taxes withheld to KY in Box 17. (If taxes are showing in Box 19, for local taxes, I describe below how to handle this). If there is nothing in Box 17 for KY, then delete the KY return. You won't need it.
If there are taxes withheld in Box 17 for KY, then you will file a nonresident reciprocal return (and not a regular nonresident return) for KY. Your taxes withheld to KY state will be refunded to you. But you will owe Indiana tax on this same income.
On your Indiana return, you may claim a credit for the local tax you pay to Louisville. See the following instructions to do this:
-
Make sure on the W2 screen (on the Federal side of the return)
that the local tax information in boxes 18-20 is associated with Kentucky.
-
Make sure (on the Indiana return) you fill out the correct
residency information, including your count
of residency
and Out of state, Kentucky as your county
of employment.
-
After several screens, you will
come to a screen titled: Take a look at Indiana credits and
taxes.
-
Under the subheading Personal,
home, and family credits, click the Start box for Credit for Non-Indiana Local Taxes.
-
Click
Yes
on the next screen.
-
Fill in the appropriate information from your W-2 on
the next screen entitled Credit for Non-Indiana Local Taxes.
You will then be credited for the amount you might have paid to
the Kentucky locality up to the amount you are taxed in your Indiana
county on this same income.
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Yes
No
