Work in Indiana, Live in Michigan: Tax Filing Guide

Reciprocity basics

How does Indiana-Michigan reciprocity work?

Indiana has reciprocity agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. Michigan reciprocates with Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. The Indiana-Michigan agreement has been in effect since January 1, 1968.

Under reciprocity, Indiana does not impose its adjusted gross income tax on the salaries, wages, tips, and commissions earned by Michigan residents who work in Indiana. The reverse also applies: Michigan does not tax Indiana residents who work in Michigan on those same income types. Income from other sources, such as self-employment, partnership distributions, rental property, or gambling winnings, is not covered by reciprocity. If you have Indiana-source income beyond wages, tips, and commissions, you may need to file Indiana Form IT-40PNR instead of the IT-40RNR.

The Indiana Department of Revenue published these reciprocity rules in Information Bulletin #33 (revised December 2024), which cites IC 6-3-5-1 as the governing statute.

Filing returns

Which tax returns do you file?

Report all of your wages on your Michigan MI-1040 as a resident. Michigan's rate for 2026 is 4.25 percent, applied after the personal exemption. The 2026 Michigan personal exemption is $5,900 per person. Because of reciprocity, a Michigan resident whose only Indiana-source income is wages does not owe Indiana state income tax.

You do file Indiana Form IT-40RNR, the reciprocal state nonresident return, to calculate and pay Indiana county income tax. This form is available to full-year residents of Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin whose only Indiana income is W-2 wages. The 2025 IT-40RNR was due April 15, 2026; returns for your 2026 wages follow in the spring of 2027. Indiana's Form IT-9 or a federal Form 4868 extended the 2025 Indiana filing time to November 16, 2026. Michigan extends its filing deadline if you send a payment of your remaining estimated tax with a copy of your federal extension (Form 4868) by the original date.

Stopping Indiana withholding

What forms stop Indiana state withholding?

File Indiana Form WH-47, Certificate of Residence (State Form 9686), with your Indiana employer. The form identifies your state of legal residence as Michigan and tells your employer not to withhold Indiana adjusted gross income tax from your paychecks. A qualified nonresident employee who works in Indiana is required to submit a properly completed WH-47 to his or her employer, according to Indiana Information Bulletin #33.

Do not send the WH-47 to the Indiana Department of Revenue. Your employer keeps it in its records. Because the certificate is held by the employer, a new Indiana employer will need its own copy. This form does not exempt employees from applicable local income taxes, such as county taxes, for the state of Indiana.

Indiana employers are not required to withhold Michigan tax, but some voluntarily register with Michigan Treasury and withhold. Ask your payroll department. If no Michigan tax is withheld and you expect to owe more than $500 when you file MI-1040, Michigan expects quarterly estimated payments on Form MI-1040ES.

Indiana county tax

How does Indiana county income tax apply?

Indiana's reciprocity agreements do not cover Indiana local income taxes, and the WH-47 itself says the employer remains responsible for withholding any applicable Indiana county tax. For someone who lives outside Indiana, the county is fixed on January 1: if your principal place of work is in an Indiana county on January 1, you owe that county's local income tax (LIT) for the year. If you did not start work in Indiana until after January 1, you are not subject to county tax that year.

Rates come from the Department's Departmental Notice #1. For 2026 they run from 0.5% in Porter County to 3.0% in Randolph County. Examples: Allen County 1.59%, Elkhart County 2%, St. Joseph County 1.75% and LaPorte County 1.45%.

You report and settle the county tax on Form IT-40RNR, which asks for the wages, tips, salaries and commissions earned in Indiana. Exemptions are not allowed when figuring county tax on this form. If your employer withheld the right amount, the return shows little or no balance; otherwise you pay the difference or get a refund.

Short stints are treated differently. For qualified nonresident employees who work in Indiana for 30 days or less in a calendar year, withholding is not required if the employer has a time and location reporting system, or if the employee provides a completed Form WH-4AFF. Either condition is enough on its own, and if you worked 30 days or less in Indiana during the year, you may be able to claim an exemption for those wages on the IT-40RNR.

Michigan credit for county tax

Can Michigan credit Indiana county taxes?

Michigan allows a credit on MI-1040 line 18 for income tax imposed by government units outside Michigan, including local government units in reciprocal states. You may claim a credit for Indiana county income tax paid on your wages.

The credit cannot exceed the smaller of the Indiana county tax paid or the Michigan tax attributable to the same income. Michigan calculates the second amount by dividing the income taxed by both jurisdictions by your total Michigan taxable income (MI-1040 line 14) and applying that percentage to your Michigan tax (line 17). Include a copy of your Indiana IT-40RNR with your Michigan return to support the credit.

If the county rate is lower than Michigan's effective rate on the same wages, the full county tax is typically credited and Michigan collects the balance. The county tax reduces your Michigan liability but does not eliminate it. For official details on calculating this credit, see the MI-1040 instruction booklet published by the Michigan Department of Treasury.

Check your own city as well. Twenty-four Michigan cities levy an income tax, including Albion, Battle Creek, Benton Harbor, Grand Rapids, Hudson, Jackson, Lansing and Detroit, and reciprocity does not reach local taxes. A resident of one of these cities generally owes the city tax on wages earned anywhere; Detroit, for example, taxes all compensation of its residents wherever the work is done, at 2.4% for residents (1.2% for nonresidents who work there). Look up your city's return and rate before you file.

Worked example: Michigan resident earning wages in St. Joseph County, Indiana

Single filer, all work in St. Joseph County (IN). Michigan 4.25% rate, $5,900 personal exemption, St. Joseph County LIT at 1.75% from Departmental Notice #1. Approximate, not tax advice.

Withholding errors

What if your employer withheld Indiana state tax by mistake?

If your employer withheld Indiana adjusted gross income tax despite your WH-47, you can recover it by filing Indiana Form IT-40RNR (if your only Indiana income is W-2 wages) or Form IT-40PNR (if you have other Indiana-source income). Either form will show zero Indiana state tax owed, and the withholding is refunded.

Check your first pay stub of the year to confirm no Indiana state tax is withheld. If it is, give payroll a new WH-47 in writing. Amounts already withheld come back only through the Indiana return.

Do not claim Indiana state withholding as a credit on your Michigan return. Recover it directly from Indiana.

Remote work

What if you work remotely from Michigan for an Indiana employer?

For state income tax, remote days do not change your filing obligation. Under reciprocity, Michigan taxes all of your wages as a resident and Indiana does not tax them, whether you work at the Indiana site or at home in Michigan.

County income tax is different. The IT-40RNR taxes the wages you earned in Indiana, at the rate of the county that was your principal place of work on January 1. If you work entirely from home in Michigan and never work in Indiana, there are no Indiana wages to report; on a hybrid schedule, only the Indiana-day wages belong on the form.

If you split time between Indiana and Michigan, keep a log of which days you worked in each state. Your IT-40RNR should reflect only the wages attributable to work performed in Indiana. Your W-2 Box 16 should show the Indiana-allocated wages. Discuss with your employer how your wages are allocated, because the IT-40RNR uses the Indiana wages reported on your W-2.

Mid-year move

What happens if you move between the states during the year?

If you move from Michigan to Indiana during the year, you become a part-year resident of both states. Michigan uses the MI-1040 with Schedule NR to split your income between the residency periods. Indiana uses Form IT-40PNR for part-year residents and nonresidents.

Reciprocity applies only during the portion of the year that you were a Michigan resident. For those months, your Indiana wages are exempt from Indiana state tax and taxable only by Michigan. After you become an Indiana resident, Indiana taxes your income as a resident at the 2.95 percent rate (2026), plus the county tax of your county of residence. Michigan taxes only income earned while you lived in Michigan, so there is no Michigan tax on the later wages to credit.

Document your move date with a lease, property purchase records, updated driver's license, voter registration changes, and utility connection dates. Update your WH-47 status with your employer after moving, since the reciprocity exemption no longer applies once you become an Indiana resident. Give your employer a new Indiana Form WH-4 so Indiana state and county taxes are withheld for the rest of the year. This is general information, not tax advice.