Many Americans do whatever they have to when it comes to finding stable employment. This can even include crossing state borders to work, though sometimes this can lead to a more complex tax situation. In an effort to simplify tax time for interstate commuters, some states have set agreements so the employee only has to file taxes in their home state.
Ohio has one of these agreements, known as reciprocal tax agreements, for workers who live in Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia. Any wages earned by taxpayers in these states are not subject to Ohio income tax, with the submission of Form IT-4NR to the Buckeye State employer.
Reciprocal agreements only cover earned income, meaning non-employment income is still subject to Ohio income tax. Non employment income can include:
- Capital gains from personal property sales
- Rental income
- Income from partnerships, LLCs, and S-Corporations
- Income from services or consulting work performed in state
If you have any of these forms of income from Ohio, you will need to file a tax return for both your home state and Ohio. Additionally, if you are not a resident of one of the aforementioned states, and you have earned income in Ohio, you will need to file two tax returns. However, you can usually file for a credit of the overpayment.
Reciprocity is an important part of tax time for several Americans who travel into another state for work, and can save time and stress for many taxpayers.