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Category: Indiana

Indiana Credit for Taxes Paid to Other States


If you received income from another state while you were an Indiana resident, you must report that income on your Indiana income tax return. You may be able to take a credit for taxes paid to another state. If you had income from another state, and had to pay taxes to that state, read the following instructions carefully.


If you were an Indiana resident during the current tax year and had income from another state, you can take a credit for the taxes withheld on the resident return. You should always check with the other state's rules concerning the taxation of your income.


You must enclose a copy of the income tax return (not just the W-2 forms) you filed with the other state to claim this credit. If the other state's return is not enclosed, the credit will not be allowed.


Note: TaxSlayer will automatically calculate the Credit for Taxes Paid to Another State for your Resident return if you have a Non-Resident return created on your account. If the other state return is a Part-Year return, you will be required to manually enter the income taxed by Indiana and the other state as well as the "total tax" on the other state return.


Reciprocal Agreement

If you were an Indiana resident during the taxable year and had income from Kentucky, Michigan, Ohio, Pennsylvania or Wisconsin you are covered by a reciprocal agreement. However, this agreement only applies to income from wages, salaries, tips and commissions. If you had other types of income from these states (such as business income, farm income, etc.), use the Group A Worksheet to figure your credit.


Normally, employers in these states will withhold Indiana state tax from your wages because of the reciprocal agreement. However, if the state tax they withheld is not for Indiana, you must file a claim for refund with that state. You still have to include this income on your Indiana return and pay the Indiana tax. You will get some or all of the other state's taxes back by filing a refund claim with them. For complete filing instructions for the reciprocal states, visit our Knowledgebase Article by clicking here.


Caution: You may have to make estimated tax payments to Indiana. If the reciprocal state employer does not withhold Indiana withholding on your wage income, or does not withhold enough, see Page 9 of Indiana IT-40 Booklet for information on how to figure and pay estimated tax.


Reverse Credit

If you were an Indiana resident during the taxable year and had income from  Arizona, Oregon or Washington DC,  you must pay Indiana tax on all of your income. You will also need to file a nonresident return with the other state and claim a credit on their tax return for the Indiana tax paid. This is located under the Credit for Taxes Paid section of those returns.


No State Income Tax

If you were an Indiana resident during the taxable year and had income from Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, you are not allowed to claim this credit. These states do not have any income tax. You must file an Indiana resident return and pay Indiana tax on all your income.


For additional information pertaining to Credit for Taxes Paid to Another State, please see Page 40 Indiana IT-40 Booklet.