Iowa and Illinois have a reciprocal agreement for individual income tax purposes. At this time, Iowa's only income tax reciprocal agreement is with Illinois.
Any wages or salary made by an Iowa resident working in Illinois is taxable only to Iowa and not to Illinois. Any wages or salary made by an Illinois resident working in Iowa is taxable only to Illinois and not to Iowa.
An Iowa resident working for wages or salary in Illinois should complete and file Illinois form IL-W-5-NR “Employee's Statement of Nonresidence in Illinois” with the employer so that the employer will be aware it is appropriate to withhold Iowa income tax. The Iowa resident should also complete an Iowa W-4.
An Illinois resident working for wages or salary in Iowa should complete and file the IA Employee’s Statement of Nonresidence in Iowa (44-016) with the employer so that the employer will be aware it is appropriate to withhold Illinois income tax.
Iowa will tax any Iowa-source income received by an Illinois resident that is not from wages or salaries. Illinois will tax any Illinois-source income received by an Iowa resident that is not from wages or salaries. Examples of income that are not wages and salaries and, therefore, not covered under the Iowa-Illinois Reciprocal Agreement are Iowa gambling winnings and unemployment compensation for employment in Iowa.