Taxes on part time residency

Question

my daughter worked in illinois for all of 2024 but she lived in indiana for 5 months and and illinois for 7 months. how much of her income should she report on each of her state forms?

Answer 1

This case depends on how a state taxes source income. For instance,

1. a state may tax worldwide income,
2. or a state may only tax income sourced from that state.
3. And, a state may not tax any source income.
4. Then, states may have reciprocity where they may not tax source income or certain professions from a particular state, usually as long as the other state does the same.
5. Then, states may allow tax credits to employees that pay income tax to other states.

You would need to consider which is the case for Illinois and/or Indiana.

Answer 2

Assuming that when she moved to the new state she changed all her documentation to the new state: drivers license, car registration, voting card. Then she is a part year resident for two states.

• For 7 months she lived and worked in Illinois.
• For 5 months she lived in Indiana and worked in Illinois.

Whenever a person works in one state and lives in another, the first step is to investigate reciprocity. Visit the state tax website of both states and see what happens in that situation. Sometimes it is easy, other times it is complex.

During the split period it is possible that a person is a resident of x and a non-resident of Y; there will be forms for that situation.

To complete the multiple state tax forms, each paycheck will have to be assigned to each situation. The same with other income such as interest or dividends.

The W-2 may not reflect the correct income split, because it can depend on how quickly the W-4 was submitted and processed. It will show where ta money withheld was sent, but it may not match the actual income split.