Work in Wisconsin, Live in Illinois: How Taxes Work

Reciprocity

Do Wisconsin and Illinois Have a Tax Reciprocity Agreement?

Yes. Wisconsin and Illinois have maintained a reciprocity agreement since January 1, 1971. Under the agreement, Illinois residents who earn employee compensation in Wisconsin are not taxed by Wisconsin on that income. Those wages are taxed only by Illinois at its flat 4.95 percent rate.

The Illinois Department of Revenue confirms that residents earning employee compensation in Iowa, Kentucky, Michigan, or Wisconsin are covered by reciprocal agreements and are not taxed by those states. The Wisconsin Department of Revenue publishes the same guidance in Publication 121, listing Illinois among its four reciprocal states (Illinois, Indiana, Kentucky, and Michigan).

The practical effect is that you skip the Wisconsin income tax system entirely for wage income. Wisconsin's graduated rates, which range from 3.50 to 7.65 percent for 2026, do not apply to your earnings. You pay only the Illinois single flat rate. For the reverse direction (Wisconsin resident working in Illinois), see our work in Illinois, live in Wisconsin guide.

This is one of the longest-running state reciprocity agreements in the country, covering more than five decades of cross-border commuting between the greater Chicago metro area, including Lake and McHenry counties, and southeastern Wisconsin.

Filing Obligations

Which Tax Returns Do I File as an IL Resident Working in WI?

File only the Illinois IL-1040 resident return, reporting all income from every source. No Wisconsin return is needed as long as your only Wisconsin income is employee wages covered by reciprocity.

Report your Wisconsin wages on IL-1040 as Illinois income. Your W-2 should ideally show the wages under Illinois (state code IL) with Illinois withholding. If your employer lists the wages under Wisconsin (state code WI) with zero state tax withheld, you still report the full amount on your IL-1040 as income subject to Illinois tax. Keep records showing the W-220 is on file with your employer.

Both returns share the federal April 15 due date. Illinois grants an automatic six-month extension for filing (to October 15) if you cannot file by April, but you must still pay any estimated tax owed by the original deadline to avoid penalties.

Withholding Setup

How Do I Stop Wisconsin Withholding From My Paycheck?

File Wisconsin Form W-220 (Nonresident Employee's Withholding Reciprocity Declaration) with your Wisconsin employer. This form certifies that you are domiciled in Illinois and authorizes the employer to stop withholding Wisconsin income tax from your wages.

The exemption remains in effect as long as you continue to qualify under the reciprocity agreement. You do not need to refile W-220 each year unless your residency changes.

After filing W-220, your employer should withhold Illinois income tax at 4.95 percent and remit it to the Illinois Department of Revenue. If your Wisconsin employer cannot set up Illinois withholding, you have two options: request additional Illinois withholding through another income source using Form IL-W-4, or make quarterly estimated payments to Illinois using Form IL-1040-ES.

If you start a new Wisconsin job mid-year and your employer withholds Wisconsin tax before you submit W-220, ask payroll to adjust immediately. Filing W-220 before your first paycheck avoids the need to recover Wisconsin withholding through a refund filing later.

Covered Income

What Types of Income Does the Reciprocity Agreement Cover?

The reciprocity agreement covers only income earned as an employee: wages, salaries, tips, commissions, and similar compensation. The Illinois Department of Revenue defines the covered scope as wages, salaries, tips, or other employee compensation from an employer in Wisconsin.

Reciprocity does not cover:

• Self-employment income from a business or trade conducted in Wisconsin
• Rental income from Wisconsin property
• Gambling winnings from Wisconsin sources
• Capital gains on the sale of Wisconsin property
• Partnership or S-corporation distributions from Wisconsin operations

If you earn non-wage income from Wisconsin sources, you must file a Wisconsin nonresident return (Form 1NPR) and report that income to Wisconsin. Wisconsin taxes nonresidents on Wisconsin-source income at the same graduated rates that apply to residents (3.50 to 7.65 percent for 2026). You can then claim a credit on your Illinois IL-1040 using Schedule CR for the Wisconsin tax paid on that non-wage income, preventing double taxation.

Incorrect Withholding

What If My Employer Already Withheld Wisconsin Tax?

If your employer withheld Wisconsin income tax from your wages before you filed Form W-220, you need to recover that money. File a Wisconsin nonresident return (Form 1NPR) reporting your Wisconsin wages and claiming a refund of the withheld tax. Mark the return as a nonresident filing and note the reciprocity exemption.

On the Illinois side, report all wages on your IL-1040 as usual. Do not use Schedule CR for Wisconsin wages covered by reciprocity. The Schedule CR instructions state: do not include wages you received for working in Wisconsin while you were an Illinois resident, unless you paid tax to a city or county on those wages.

If Wisconsin withheld tax and you cannot get a timely refund before your Illinois return is due, you may temporarily pay tax to both states. File your IL-1040 paying full Illinois tax. File Wisconsin Form 1NPR to claim the WI refund. Once Wisconsin processes your refund, you will have paid tax only to Illinois, as the reciprocity agreement intends.

Going forward, file W-220 with your employer to prevent further Wisconsin withholding from future paychecks. Wisconsin typically processes nonresident refund returns within the same timeframe as resident returns, but plan for several weeks of processing time if you file on paper rather than electronically.

Worked Example: IL Resident Earning $70,000 in Wisconsin

Single filer, all wages earned in Wisconsin, W-220 on file, IL flat rate 4.95 percent, IL personal exemption $2,925 for 2026

Remote Work

What If I Work Remotely From Illinois for a Wisconsin Employer?

Wisconsin taxes nonresidents only on income earned from services performed within the state. Days you work from your home in Illinois are Illinois-source income, not Wisconsin-source. Wisconsin does not apply a convenience-of-the-employer rule, so remote workdays from Illinois do not generate Wisconsin tax liability.

If you work entirely from Illinois for a Wisconsin-based employer, you have no Wisconsin-source wage income and no Wisconsin filing obligation. You do not even need Form W-220, because there is no Wisconsin withholding to stop. File your Illinois IL-1040 and report all wages as Illinois income.

For hybrid workers who split time between a Wisconsin office and an Illinois home, only the days physically worked in Wisconsin are potentially Wisconsin-source income. Reciprocity covers all employee compensation from a Wisconsin employer regardless of work location, so the on-site versus remote split does not change your state tax outcome. You owe only Illinois tax either way.

Mid-Year Move

What If I Moved Between Illinois and Wisconsin During the Year?

File a part-year resident return in each state. Illinois uses IL-1040 for your Illinois-resident period. Wisconsin uses Form 1NPR for your nonresident or part-year resident period.

During the months you lived in Illinois, reciprocity shields your Wisconsin wages from WI tax. During the months you lived in Wisconsin, you are a WI resident and owe Wisconsin tax on all income. After moving to Wisconsin, you owe Illinois tax only on Illinois-source income, if any remains.

Notify your employer immediately when you move. If moving from IL to WI, revoke your W-220 and begin Wisconsin withholding. If moving from WI to IL, file W-220 and switch to Illinois withholding. The changeover date should match your actual move date.

Keep records of the exact transition. Lease agreements, utility activation dates, and a driver's license change establish the residency switch if either state questions your filing position.

Local Taxes

Do Any Local Income Taxes Apply to This Commute?

No. Neither Wisconsin nor Illinois imposes a local or city income tax. This makes the WI-IL commuter tax situation straightforward compared to crossings like MD-VA, where Maryland county taxes add a layer of complexity.

Your total state-level income tax obligation is the Illinois flat 4.95 percent rate applied to all your income. There are no county surcharges, city wage taxes, or school district income taxes to track on either side of the state border.

If you have income beyond wages (investments, rental property, self-employment), you still owe Illinois tax on all of it as a resident. Wisconsin's lack of local income taxes means your only cross-border exposure is at the state level for non-wage Wisconsin-source income. Reciprocity eliminates even that for employee compensation. Your net tax situation is essentially identical to an Illinois resident working entirely within Illinois.