Illinois, Iowa, Kentucky, Michigan, and Wisconsin have a reciprocal agreement regarding income tax for those who work in one of these states but live in another. Under this agreement, residents only pay income taxes to their home state regardless of where they work.
Living in Illinois and Working in Another State
Under the reciprocal agreement between the states, an Illinois resident who works in Iowa, Kentucky, Michigan, or Wisconsin, is only required to pay income tax to Illinois. Iowa, Kentucky, Michigan, and Wisconsin do not tax the wages of Illinois residents working in their state.
If you are an Illinois resident and have had taxes withheld from your paycheck for these states, you are entitled to a refund. As an Illinois resident, you cannot take a credit for taxes withheld from these states on your Illinois return.
Living in Another State and Working in Illinois
If you are an Iowa, Kentucky, Michigan, or Wisconsin resident who works in Illinois you are not subject to Illinois income tax on wages, salaries, tips or commissions received from employers in Illinois. You are only required to pay taxes in your home state.
This does not apply to any other income received in Illinois, such as Illinois lottery winnings. If you had Illinois tax withheld from your paycheck you can receive a refund by filing an Illinois tax return (Form IL-1040 and Schedule NR for nonresidents).