Live in Illinois, Work Remotely for a South Dakota Employer: Who Taxes You?
Answer
Illinois gets all of it. Because South Dakota does not tax wage income, no South Dakota withholding exists and no South Dakota return is required — but Illinois taxes residents on worldwide income, so every dollar earned in South Dakota still belongs on your Illinois resident return.
Last verified
The instinct that working in a no-tax state means paying no tax is the single most expensive misunderstanding in this niche. South Dakota 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 | South Dakota | |
|---|---|---|
| Taxes wages | Yes — flat | No |
| Reciprocity partners | 4 (Form IL-W-5-NR) | None |
| Convenience rule | No | No |
| Nonresident return | Form IL-1040 with Schedule NR | Not applicable |
| Credit for other-state tax | Schedule CR | No income tax |
| Nonresident safe harbour | 30 days | Not applicable |
| Local income tax | No | No |
| Revenue department | Illinois Department of Revenue | South Dakota Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in South Dakota and working in Illinois gives:No state income tax on your wages.
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 → South DakotaHome state only
- 1099 contractor: Illinois → South DakotaHome state only — estimated payments
- Moved mid-year: Illinois → South DakotaOne part-year return — the state you left
Other Illinois pairs
Questions people actually ask
I live in Illinois and work remotely for a South Dakota employer. Which state do I pay?
Illinois gets all of it. Because South Dakota does not tax wage income, no South Dakota withholding exists and no South Dakota return is required — but Illinois taxes residents on worldwide income, so every dollar earned in South Dakota still belongs on your Illinois resident return.
Which state should my employer be withholding for?
Illinois. Your employer should withhold Illinois tax rather than South Dakota tax on these wages. If a South Dakota line is showing on your pay stub, raise it with payroll now rather than at filing time.
How current is this?
The Illinois and South Dakota rules on this page were last checked against Illinois Department of Revenue and South Dakota 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
- South Dakota Department of Revenue — individual income taxaccessed 2026-08-07