Illinois Part-Year Resident Tax Filing Requirements

If you moved into or out of Illinois during the tax year, your Illinois part-year resident tax filing is done on Form IL-1040 with Schedule NR attached. Illinois taxes all of your income during the months you were a resident, plus any Illinois-sourced income earned while you lived elsewhere, all at the flat 4.95% rate. The return is due April 15, and getting the allocation right on Schedule NR is what keeps you from overpaying or triggering a notice from the Illinois Department of Revenue.

Are You a Part-Year Resident

You are a part-year resident if you established Illinois domicile during the year, or if you were an Illinois resident who moved and set up a permanent home in another state before December 31.¹ Domicile means the place you intend to treat as your permanent home. The date it changed is the line that splits your year.

IDOR looks at objective evidence to decide when that shift happened: registering to vote, getting a new driver’s license, signing a lease, changing bank account addresses, and physically moving your belongings. If you moved to Illinois on August 15, your residency period runs from August 15 through December 31, and everything before that date falls under the nonresident rules.

The distinction matters because two different rules apply to the same tax year. While you were an Illinois resident, the state taxes all of your income no matter where it came from. While you were a nonresident, the state taxes only income from Illinois sources.²

What Income Illinois Can Tax

The heart of a part-year return is deciding which dollars belong in the Illinois column. Start with your total federal adjusted gross income, then work line by line. The rules differ by income type.

Wages and Salaries

Compensation earned while you were domiciled in Illinois is Illinois income, even if the work was done remotely from another location.³ Once you establish domicile in a new state, wages earned there generally drop out of the Illinois column, unless you are still physically working inside Illinois.

If you moved out but kept commuting back to an Illinois workplace, those wages remain taxable. Nonresidents who perform services in Illinois for more than 30 working days during the tax year owe Illinois tax on a proportionate share of their pay. The proportion is the number of working days spent in Illinois divided by total working days everywhere.⁴ Pay stubs, W-2s, and a clear record of the move date are what you need to split an annual salary correctly.

Interest, Dividends, and Capital Gains

Investment income follows a date-of-receipt rule. A dividend paid while you were domiciled in Illinois goes in the Illinois column. A capital gain realized after you established domicile in the new state stays out. Timing controls the allocation, which makes record-keeping simpler than it is for wages.

The exception is Illinois real property. Capital gains from selling real estate located in Illinois are always allocated to Illinois no matter where you live when the sale closes.⁵ Sell an Illinois condo six months after moving away and the gain is still Illinois-sourced.

Rental and Business Income

Rental income from property physically located in Illinois is allocated to Illinois for the entire year regardless of when you moved.⁵ This catches filers off guard. Wages follow your domicile; rents follow the property. Own a two-flat in Chicago and move to Indiana in March, and every month’s rent still lands in the Illinois column.

Business income from a sole proprietorship or pass-through entity is sourced based on where the income-producing activity occurs. If your business operates in Illinois, that income stays Illinois-sourced even after you leave. For business income from outside Illinois, only the portion earned during your residency period belongs in the Illinois column.

Retirement Income

This is the bright spot on an Illinois part-year return. Distributions from 401(k) plans, IRAs, government pensions, Social Security, and railroad retirement are entirely exempt from Illinois income tax.⁶ The exemption also covers self-employed retirement plans, Roth IRA conversions, and state and local deferred compensation plans.⁷

You report the retirement income on your federal return and subtract the exempt portion when calculating your Illinois base income. Full-year, part-year, or nonresident status does not affect the exemption. If you are moving to or from Illinois in retirement and most of your income is from qualified plans, your Illinois tax bill may be very small or zero.

Reciprocal Agreements With Iowa, Kentucky, Michigan, and Wisconsin

Illinois has reciprocal tax agreements with Iowa, Kentucky, Michigan, and Wisconsin. Wages and salaries earned by a resident of one of those states while working in Illinois are taxed only by the home state, not by Illinois.⁸ The reverse also holds: an Illinois resident earning wages in one of those four states owes tax only to Illinois on that pay.³

Reciprocity applies only to wages and salaries. Gambling winnings, rental income, and business profits earned in a reciprocal state stay taxable by the source state. To use the agreement, a resident of one of the four reciprocal states files Form IL-W-5-NR with the Illinois employer, which tells the employer to withhold for the home state instead of Illinois.⁹ If you change your state of residence, notify your employer within ten days.

Reciprocity can create a mid-year shift for part-year filers. Say you lived in Wisconsin through June while working at an Illinois office. Your January-through-June wages fall under the reciprocal agreement and are taxed only by Wisconsin. After you move to Illinois in July, wages from the same employer are now Illinois income. Tracking that transition date is essential to filling out Schedule NR correctly.

The Forms: IL-1040 and Schedule NR

Every part-year resident files Form IL-1040 with Schedule NR (Nonresident and Part-Year Resident Computation of Illinois Tax) attached.³ Schedule NR is where the allocation work lands. It has two columns: Column A for your federal totals and Column B for the Illinois portion of each income line.²

Column A mirrors your federal return. Column B requires you to work through the line-by-line instructions, entering only the income Illinois can tax: everything received during your residency period, plus any Illinois-sourced income from your nonresident period. The Schedule NR instructions walk through each line individually because the allocation rules differ for wages, investment income, retirement income, and deductions.

Keep the documentation that proves when your domicile changed. Lease agreements, closing documents, utility activation notices, voter registration confirmations, and the new state’s driver’s license all serve that purpose. Copies of all W-2s, 1099s, and the return you filed in the other state should be retained as well. IDOR may cross-reference your Illinois allocation against the other state’s return.

Claiming Credit for Tax Paid to Another State

Double taxation is the biggest worry for part-year filers. Schedule CR (Credit for Tax Paid to Other States) is the tool that prevents it. If the same income appears on both your Illinois return and another state’s return, Illinois allows a credit for the tax you actually paid to the other state on that overlapping income.¹⁰

Four rules limit what you can claim:

Part-year residents may claim the credit only on income earned while they were Illinois residents. Income from your nonresident period does not qualify.
The credit is based on the actual tax liability shown on the other state’s return, not the withholding on your W-2. If $1,000 was withheld but your true bill was $750, the credit is based on $750.
Penalties and interest paid to the other state do not count. Only the tax itself.
Wages already exempted by a reciprocal agreement do not qualify, because they were never double-taxed to begin with.

To complete Schedule CR you need the final return you filed with the other state. The instructions include a proration formula for part-year residents: multiply the total tax paid to the other state by a fraction whose numerator is your Illinois-period income taxed by that state and whose denominator is the total income taxed by that state.¹⁰ Filing the other state’s return first makes this math easier, because you will already have the numbers.

Deadline, Where to File, and Penalties

The deadline for calendar-year filers is April 15. Illinois follows the federal filing period, so a federal extension automatically extends your Illinois filing deadline.¹¹ An extension gives you more time to file but does not extend the deadline to pay. If you owe tax, send payment by April 15 to avoid penalties.

Electronic filing through commercial tax software is the fastest option and reduces the risk of math errors on Schedule NR. If you file on paper, the address depends on whether you owe money:

With payment: Illinois Department of Revenue, PO Box 19027, Springfield, IL 62794-9027
Without payment: Illinois Department of Revenue, PO Box 19041, Springfield, IL 62794-9041

Both addresses come from the current IL-1040 instructions.¹² Sign and date the return before mailing, and include any payment with it.

Missing the deadline or underreporting Illinois income carries real costs. IDOR imposes separate penalties for late filing and late payment, and they can stack.¹³

The late-filing penalty starts at 2% of tax due, capped at $250. If you still have not filed within 30 days after IDOR sends a nonfiling notice, a second-tier penalty applies: the greater of $250 or 2% of the tax on the return, up to $5,000. That second tier applies even if you owe no tax.

The late-payment penalty depends on how late you are. Payments 1 to 30 days late incur a 2% penalty. After 30 days, the rate rises to 10%. If IDOR opens an audit and payment still has not been made, the penalty climbs to 15%, and it reaches 20% if payment is not made within 30 days after the audit concludes.¹³ Interest also accrues on unpaid balances from the original due date.

For part-year residents, the most common penalty trigger is underestimating the Illinois portion of income on Schedule NR, which IDOR catches by cross-referencing your return against the other state’s records. Filing accurately the first time is far cheaper than fixing it later.

1
Illinois Department of Revenue. First-Time Filer Residency Information
2
Illinois Department of Revenue. IL-1040 Schedule NR Instructions
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Illinois Department of Revenue. Illinois Department of Revenue – Filing Requirements
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CCH AnswerConnect. Illinois – Sourcing of Compensation for Personal Services
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Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/303
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Illinois Department of Revenue. Does Illinois Tax My Pension, Social Security, or Retirement Income
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Illinois Department of Revenue. Publication 120 Retirement Income
8
Iowa Department of Revenue. Iowa – Illinois Reciprocal Agreement
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Illinois Department of Revenue. IL-W-5-NR Employee’s Statement of Nonresidence in Illinois
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Illinois Department of Revenue. 2025 IL-1040 Schedule CR Instructions
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Illinois Department of Revenue. Due Date/Extension to File Income Tax Return (2025 IL-1040)
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Illinois Department of Revenue. 2025 IL-1040 Form Instructions
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Illinois Department of Revenue. Pub-103 Penalties and Interest for Illinois Taxes