What Taxes Do You Owe When Leaving Illinois?

If you move out of Illinois partway through the year, you still owe Illinois income tax on everything you earned while you lived there, plus any Illinois-source income you receive after you leave. The state’s flat 4.95 percent rate applies to that part-year slice, and you report it on Form IL-1040 together with Schedule NR. Understanding the taxes when leaving Illinois comes down to three things: pinning down the date your domicile actually changed, filing the right forms for the right income, and knowing which categories of money Illinois can and can’t reach once you’re gone.

When Illinois Stops Treating You as a Resident

Illinois considers you a resident if you’re domiciled in the state or present there for more than a temporary purpose. Domicile is the place you treat as your permanent home and intend to return to. You get one domicile at a time, and the one you have sticks until you deliberately replace it with another.¹

Replacing it takes two things at once: physically being in the new state and genuinely intending to stay. The Department of Revenue looks at objective proof. A driver’s license in the new state, voter registration there, a lease or deed, moved belongings — these push toward a real change. Keeping an Illinois home, holding an Illinois professional license, or leaving significant personal property behind pushes the other way.¹

Day counts also matter. Spending more than nine months of the tax year in Illinois creates a presumption that you’re a resident. Being absent for a full year creates a presumption that you’re not. Both can be rebutted by other facts, but they set the default. A simple calendar showing days spent in each state is one of the cheapest ways to protect yourself if the move is ever questioned.

Part-year residents and nonresidents are not the same thing, and the difference changes your tax bill. A part-year resident lived in Illinois for part of the year and then established a new domicile elsewhere; they owe Illinois tax on everything received during the Illinois period plus Illinois-source income received after the move. A nonresident lived outside Illinois all year and owes tax only on income sourced to the state.²

The Forms: IL-1040 and Schedule NR

A mid-year mover files the standard Form IL-1040 along with Schedule NR, Nonresident and Part-Year Resident Computation of Illinois Tax. You complete the IL-1040 as if you were a full-year resident, then use Schedule NR to carve out the portion Illinois actually gets to tax.³

Schedule NR has two main columns. Column A carries your federal totals. Column B captures the Illinois portion: income received while you were a resident, plus any Illinois-source income received after the move. Your domicile change date is the dividing line, and every paycheck, gain, or payment lands on one side of it based on when you received it (or earned it, under accrual accounting).⁴

Adjustments to income — student loan interest, educator expenses, and similar items — get allocated between the Illinois and non-Illinois periods on Schedule NR as well. Getting the allocation right keeps you from paying Illinois tax on deductions that properly belong to income earned after your move.³

Pull together your W-2s, your 1099-NEC and 1099-MISC forms, and firm dates for the move: the day you left your Illinois home, the day you established residence in the new state, and records tying each payment to the right period. If you ran a business with activity both inside and outside Illinois during the nonresident portion of the year, the Schedule NR instructions include a Business or Farm Income Apportionment Formula worksheet you’ll need to complete.⁴

What Illinois Can Still Tax After You Leave

Once you’re no longer a resident, Illinois reaches only income with an Illinois source. That category covers more than people usually expect.

Wages for work physically performed in Illinois after your move, regardless of where the employer is headquartered.
Rental income from property located in Illinois, for as long as you own it.
Capital gains from selling Illinois land or buildings.
The Illinois-attributable share of business income, calculated through Schedule NR’s apportionment worksheet.

Interest, dividends, and most investment gains generally follow your state of residence on the date you receive them, not the location of the brokerage. A stock sold after you’ve established domicile elsewhere is typically taxed by your new state, not Illinois.⁴

Remote Work for an Illinois Employer

This is where mid-year movers get tripped up most often. Illinois sources wages to the state where the work is physically performed, not where the employer sits. If you leave Illinois but keep working remotely for a Chicago-based company, those wages generally stop being Illinois income once you’re working from another state full-time. Days you travel back to the Illinois office for meetings or training can create Illinois-source income for those specific days. Illinois uses a 30-day threshold before requiring employers to withhold state tax for nonresident employees, so occasional visits may not trigger withholding even though the underlying tax exposure can still exist.

Retirement Income Is Off-Limits Once You’re a Nonresident

If you’re leaving Illinois in retirement, this is the headline. Federal law bars any state from taxing your retirement income once you’re no longer a resident. The protection comes from 4 U.S.C. § 114 and covers distributions from 401(k) plans, traditional and Roth IRAs, 403(b) plans, 457 deferred compensation plans, SEP-IRAs, government pensions, and military retired pay.⁵

For nonqualified deferred compensation or supplemental executive retirement plans, the protection applies when payments are made as a series of substantially equal periodic payments over your life expectancy or for at least ten years. Once your domicile is in another state, Illinois cannot tax your pension or retirement account distributions, and you report that income only to your new state.⁵

Reciprocity With Iowa, Kentucky, Michigan, and Wisconsin

Illinois has wage reciprocity agreements with four neighbors: Iowa, Kentucky, Michigan, and Wisconsin. If you move to one of those states and continue working for an Illinois employer, your wages are taxable only by your state of residence. You file Form IL-W-5-NR with your employer so Illinois withholding stops and the new state’s withholding starts.

If Illinois tax was withheld after your move even though reciprocity applies, you can’t fix it with a credit. You file a nonresident Illinois return to recover the incorrectly withheld amount.⁶

Reciprocity covers only wages and salary. Business income, rental income, and investment income with an Illinois source are not covered, and remain taxable by Illinois under the normal sourcing rules.

Credit for Taxes Paid to Other States

If you earned income in another state while you were still an Illinois resident — a consulting trip to Indiana before the move, for example — the same dollars could be taxed by both states. Illinois addresses this with Schedule CR, Credit for Tax Paid to Other States. The credit equals the tax you actually owed the other state, not the amount withheld from your paycheck, which can be larger or smaller.⁶

Three limits are worth knowing. Part-year residents can claim the credit only for income earned during the Illinois residency period, not after the move. Nonresidents cannot claim it at all. And if the other state is Iowa, Kentucky, Michigan, or Wisconsin, reciprocity means your wages shouldn’t have been taxed there in the first place; if they were, you request a refund from that state rather than claim a credit against Illinois tax.⁶

Deadlines, Extensions, and How to File

Illinois grants an automatic six-month extension to file; you don’t need a separate state form. A longer federal extension is matched automatically. The extension is for filing only, not paying. Any tax owed is still due April 15, and you use Form IL-505-I to send an estimated payment by that date to avoid penalties.⁷

You can file through MyTax Illinois at mytax.illinois.gov, which generates a confirmation number. Paper returns go to the address printed in the IL-1040 instructions. Electronic returns typically process in a few weeks; paper returns take eight to twelve. Refund status is tracked through the same portal.⁸

If You File or Pay Late

The late-filing penalty is 2 percent of the tax due after credit for timely payments, capped at $250. If you still haven’t filed within 30 days of receiving a nonfiling notice, a second penalty kicks in: the greater of $250 or 2 percent of the full tax shown on the return, maxing out at $5,000.⁹

Late-payment penalties start at 2 percent if you pay within 30 days of the due date and jump to 10 percent after that. If payment comes only after the Department opens an audit or investigation, the rate rises to 15 or 20 percent depending on timing. Interest runs on top of all of it.⁹

Keep Your Domicile Evidence

Hold the final Illinois return and all supporting documents — W-2s, 1099s, move-date records, and the proof you gathered to show you changed domicile — for at least three years from the filing date. The IRS and Illinois can look back six years if income was underreported by more than 25 percent of gross income.¹⁰ Domicile proof — the new driver’s license, voter registration, lease or deed — is worth keeping indefinitely. If Illinois ever challenges your claimed move date, those documents are what settle it.

Update Your Address With the IRS

Your move also triggers a federal step. File IRS Form 8822 to change your mailing address. If your last address was in Illinois, the form goes to the IRS processing center in Kansas City, MO 64999-0023. Processing takes four to six weeks. Mail it separately rather than attaching it to a return. Skipping this step means you may miss notices, but penalties and interest run whether you see them or not.¹¹

1
Legal Information Institute. Illinois Administrative Code 86.100.3020 – Resident (IITA Section 301)
2
Illinois Department of Revenue. Filing Requirements
3
Illinois Department of Revenue. 2025 Schedule NR – Nonresident and Part-Year Resident Computation of Illinois Tax
4
Illinois Department of Revenue. Schedule NR IL-1040 Instructions
5
Office of the Law Revision Counsel. 4 USC 114 – Limitation on State Income Taxation of Certain Pension Income
6
Illinois Department of Revenue. 2025 IL-1040 Schedule CR Instructions
7
Illinois Department of Revenue. Due Date/Extension to File Income Tax Return (2025 IL-1040)
8
Illinois Department of Revenue. Illinois Department of Revenue
9
Illinois Department of Revenue. Pub-103, Penalties and Interest for Illinois Taxes
10
Internal Revenue Service. How Long Should I Keep Records
11
Internal Revenue Service. Form 8822 – Change of Address