Live in Illinois, Work Remotely for a Arizona Employer: Who Taxes You?
Answer
One state, one return: Illinois. Arizona has no wage income tax, so working there changes nothing about what you owe. Your Illinois resident return reports the Arizona income along with everything else, and there is no credit to claim because Arizona charged you nothing.
Last verified
The instinct that working in a no-tax state means paying no tax is the single most expensive misunderstanding in this niche. Arizona takes nothing, but Illinois still taxes residents on income earned anywhere, so the full amount lands on your Illinois return.
What you file
- 1Resident return · Illinois
File a Illinois resident return reporting all of your income.
The two states, side by side
| Illinois | Arizona | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — graduated |
| Reciprocity partners | 4 (Form IL-W-5-NR) | None |
| Convenience rule | No | No |
| Nonresident return | Form IL-1040 with Schedule NR | Form 140NR |
| Credit for other-state tax | Schedule CR | Form 309 |
| Nonresident safe harbour | 30 days | None published |
| Local income tax | No | No |
| Revenue department | Illinois Department of Revenue | Arizona Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Arizona and working in Illinois gives:Home state only.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- W-2 commuter: Illinois → ArizonaBoth states — credit offsets the double tax
- 1099 contractor: Illinois → ArizonaHome state, plus the client state if you work there
- Moved mid-year: Illinois → ArizonaTwo part-year returns
Other Illinois pairs
Questions people actually ask
I live in Illinois and work remotely for a Arizona employer. Which state do I pay?
One state, one return: Illinois. Arizona has no wage income tax, so working there changes nothing about what you owe. Your Illinois resident return reports the Arizona income along with everything else, and there is no credit to claim because Arizona charged you nothing.
Which state should my employer be withholding for?
Illinois. Your employer should withhold Illinois tax rather than Arizona tax on these wages. If a Arizona line is showing on your pay stub, raise it with payroll now rather than at filing time.
Does my Arizona employer's location alone create a Arizona tax obligation?
No. Arizona sources wages to the place where the work is physically performed, and it does not apply a convenience-of-the-employer rule that would override that. Days you actually spend working inside Arizona are a different matter — those are Arizona-source income and can require a nonresident return.
How current is this?
The Illinois and Arizona rules on this page were last checked against Illinois Department of Revenue and Arizona Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Illinois Department of Revenue — individual income taxaccessed 2026-08-07
- Arizona Department of Revenue — individual income taxaccessed 2026-08-07