Indiana Michigan Reciprocal Tax Agreement: What You Need to Know

The Indiana Michigan reciprocal tax agreement refers to an agreement between the two states that allows residents of either state who work across the state line to pay income tax only in their state of residency. This agreement was first signed in 1977 and has been renewed several times since.

Under the agreement, if you live in Indiana but work in Michigan, you will only pay income tax in Indiana. Similarly, if you live in Michigan but work in Indiana, you will only pay income tax in Michigan. This agreement has been put in place to avoid double taxation of residents who work across state lines.

It is important to note that this agreement only applies to income tax. If you work in one state but live in another, you may still be responsible for paying other taxes, such as sales tax and property tax, in both states.

To take advantage of the Indiana Michigan reciprocal tax agreement, you will need to file a nonresident tax return in the state where you work and a resident tax return in the state where you live. You will also need to provide proof of your residency, such as a driver`s license or utility bill, to your employer.

If you have any questions about how the Indiana Michigan reciprocal tax agreement applies to your specific situation, you should contact a tax professional or your state`s tax agency for guidance.

In conclusion, the Indiana Michigan reciprocal tax agreement is a beneficial agreement for residents who work across state lines. It allows them to avoid double taxation and simplifies the tax filing process. Make sure you understand how this agreement applies to your situation and consult with a tax professional if needed.