2026 tax year · cross-border wages
Crossing a state line into or out of Indiana
Indiana taxes its residents on income earned anywhere, and taxes non-residents on work done inside it. Which return you file depends on which direction you commute.
Indiana borders 7 states. They fall into 2 different situations, and which one applies decides whether you file one return or two.
Where Indiana has a reciprocity agreement
Indiana has wage reciprocity with Kentucky, Michigan, Ohio, Pennsylvania and Wisconsin. Work in one of these and it will not tax your wages at all: you file its exemption certificate with your employer there, which stops its withholding, and report everything to Indiana. There is no nonresident return.
| Work state | Exemption certificate | Its tax on your wages |
|---|---|---|
| Kentucky | 42A809 | $0 |
| Michigan | MI-W4 | $0 |
| Ohio | IT 4NR | $0 |
| Pennsylvania | REV-419 | $0 |
| Wisconsin | W-220 | $0 |
Kentucky attaches conditions to its agreements, not all of which apply to every partner state: Virginia residents must commute daily; Ohio residents cannot own 20%+ of an S corporation. Check which clause covers an Indiana resident before relying on it.
Reciprocity covers wages paid by an employer. It does not cover self-employment income, so a 1099 worker in Indiana generally still sources income to where the work was done.
Where you file a nonresident return and claim a credit
Indiana has no agreement with Arizona and Illinois. Work in one of these and you file a nonresident return there, report the same income again to Indiana, and claim a credit for what you already paid. The credit is capped at your Indiana liability, so you are not taxed twice, the combined bill lands at roughly the higher of the two rates. On $70,000, Illinois costs the most at $3,465 and Arizona the least at $2,065, $1,400 between them.
| Work state | Its tax | Indiana after credit | Total | Rate that governs |
|---|---|---|---|---|
| Arizona | $1,750 | $315 | $2,065 | Indiana |
| Illinois | $3,465 | $0 | $3,465 | Illinois |
What Indiana itself takes across a salary range
A single filer, taking the standard deduction. This is the figure every arrangement above is measured against, the tax Indiana charges a resident, whether the work happened inside the state or over a line:
| Wages | Indiana tax | Effective rate |
|---|---|---|
| $45,000 | $1,328 | 2.95% |
| $70,000 | $2,065 | 2.95% |
| $120,000 | $3,540 | 2.95% |
What Indiana charges as your home state
Indiana applies a single 2.95% rate to taxable income for 2026, so every extra dollar of wages is taxed at the same state rate.
On the 2026 rate itself: rate has been decreasing. Some counties add local income tax.
Indiana also has local income tax that the estimate above does not model, all 92 counties levy local income tax (0.50% to 2.90%).. Add it separately for where you live and work.
State income tax on wages only, 2026 rates. Not tax advice, what this does and doesn't cover.