Tax time doesn\u2019t have to be difficult for workers who are residents of a different state than that in which they work. Many states have enacted reciprocal tax agreements, which allows taxpayers living in certain states covered under the agreement to be exempt in paying income tax on earnings from within the work state.<\/p>\n
For example, Michigan holds a reciprocal agreement with residents of Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin. That means that anyone who lives in those states can work within the borders of Michigan without having to pay taxes to the work state on money they earned. By filing Form MI-W4 with your employer in Michigan, you will only have to pay tax on your income when you file your state resident return.<\/p>\n
Reciprocal agreements only cover employment income, however, so any money made from non-employment income must be reported on a non-resident return. Lottery and gambling winnings, rental income, gains from personal property sales, interest, and fees from services rendered in the state that aren\u2019t related to your job are considered non-employment income, and therefore not covered by the reciprocal agreement.<\/p>\n
Anyone who lives in a state not covered under Michigan\u2019s reciprocal agreement will have to file two state tax returns if they earned money in Michigan: one with their home state and one with Michigan. Generally, the home state will offer a credit for taxes paid in the work state.<\/p>\n
Don\u2019t let tax situations deter you from working in a bordering state. Instead, find out whether your state holds a reciprocal agreement and make tax time easy, by filing one return in your resident state.<\/p>\n","protected":false},"excerpt":{"rendered":"
Tax time doesn\u2019t have to be difficult for workers who are residents of a different state than that in which they work. Many states have enacted reciprocal tax agreements, which allows taxpayers living in certain states covered under the agreement to be exempt in paying income tax on earnings from within the work state. For […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[126],"tags":[331,508],"class_list":["post-944","post","type-post","status-publish","format-standard","hentry","category-states","tag-michigan","tag-reciprocal-agreement"],"yoast_head":"\n