Live in Illinois, Work Remotely for a New Mexico Employer: Who Taxes You?
Answer
Your home state takes it and the work state does not. New Mexico levies no tax on wages; Illinois taxes residents on all income regardless of where it was earned. The result is a single Illinois resident return covering the full amount, with no offsetting credit.
Last verified
The instinct that working in a no-tax state means paying no tax is the single most expensive misunderstanding in this niche. New Mexico 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 | New Mexico | |
|---|---|---|
| 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 PIT-1 with Schedule PIT-B |
| Credit for other-state tax | Schedule CR | Form PIT-1 (credit for taxes paid to another state) |
| Nonresident safe harbour | 30 days | None published |
| Local income tax | No | No |
| Revenue department | Illinois Department of Revenue | New Mexico Taxation and Revenue Department |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in New Mexico 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 → New MexicoBoth states — credit offsets the double tax
- 1099 contractor: Illinois → New MexicoHome state, plus the client state if you work there
- Moved mid-year: Illinois → New MexicoTwo part-year returns
Other Illinois pairs
Questions people actually ask
I live in Illinois and work remotely for a New Mexico employer. Which state do I pay?
Your home state takes it and the work state does not. New Mexico levies no tax on wages; Illinois taxes residents on all income regardless of where it was earned. The result is a single Illinois resident return covering the full amount, with no offsetting credit.
Which state should my employer be withholding for?
Illinois. Your employer should withhold Illinois tax rather than New Mexico tax on these wages. If a New Mexico line is showing on your pay stub, raise it with payroll now rather than at filing time.
Does my New Mexico employer's location alone create a New Mexico tax obligation?
No. New Mexico 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 New Mexico are a different matter — those are New Mexico-source income and can require a nonresident return.
How current is this?
The Illinois and New Mexico rules on this page were last checked against Illinois Department of Revenue and New Mexico Taxation and Revenue Department 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
- New Mexico Taxation and Revenue Department — individual income taxaccessed 2026-08-07