When the same income is taxed in two states, you may be eligible to claim a credit for taxes paid to the other state.
Reciprocal States refer to our KB Article.
Residents
You may qualify to take a credit for taxes paid to another state while a resident of Illinois. If the income was taxed in both Illinois and the other state, you are a resident of Illinois and you filed a tax return in the other state, you can take the credit.
Part year residents
If you are a part-year Illinois resident, you can take the credit only on income that you earned while a resident of Illinois. The program will not calculate the credit automatically on part-year returns; you must enter the information manually. You will need to manually enter the total tax and the income amounts from the other state's PDF into the Illinois portion of the return to correctly calculate the credit. The PDF can be viewed on the Summary/Print screen.
Nonresidents
Nonresidents do not qualify for this credit.
If you earned income in a reciprocal state, such as Iowa, Kentucky, Michigan or Wisconsin, the other state should not have taxed the income. If your employer withheld tax from your pay for a reciprocal state, you cannot claim the credit for taxes paid. You must file a return for the other state to claim a refund for the taxes withheld. Please refer to the Which states does Illinois have a reciprocal agreement with? instructions on how to correctly claim a refund for taxes paid in a reciprocal state.
Where to add this credit into my account.
If you have income that qualifies for the credit for taxes paid to another state you must manually add this into the program. You can do this by following this path:
- State Section
- Credits
- Credits for Taxes Paid to Another State
- Enter the amount of tax on the other state return in the box for "Please enter the amount of income tax paid to the other state(s). This is generally indicated as total tax on the other state return. This is NOT your other state withholding shown on your W-2 or other reporting form."
- Complete the section for "Enter Income Type and Amount Taxed by the Other State(s)."
Please note: You will need to follow these steps for each state you need to add.