Live in Kentucky, Work Remotely for a Illinois Employer: Who Taxes You?
Answer
Kentucky taxes the income and Illinois cannot. Residency, not the location of the job, drives this answer: Kentucky reaches all of a resident's income, and Illinois has no personal income tax to apply to the part earned inside its borders.
Last verified
The instinct that working in a no-tax state means paying no tax is the single most expensive misunderstanding in this niche. Illinois takes nothing, but Kentucky still taxes residents on income earned anywhere, so the full amount lands on your Kentucky return.
What you file
- 1Resident return · Kentucky
File a Kentucky resident return reporting all of your income.
The two states, side by side
| Kentucky | Illinois | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — flat |
| Reciprocity partners | 7 (Form 42A809) | 4 (Form IL-W-5-NR) |
| Convenience rule | No | No |
| Nonresident return | Form 740-NP | Form IL-1040 with Schedule NR |
| Credit for other-state tax | Schedule ITC | Schedule CR |
| Nonresident safe harbour | None published | 30 days |
| Local income tax | Yes | No |
| Revenue department | Kentucky Department of Revenue | Illinois Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Illinois and working in Kentucky 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: Kentucky → IllinoisReciprocal agreement — file the exemption form
- 1099 contractor: Kentucky → IllinoisHome state, plus the client state if you work there
- Moved mid-year: Kentucky → IllinoisTwo part-year returns
Other Kentucky pairs
Questions people actually ask
I live in Kentucky and work remotely for a Illinois employer. Which state do I pay?
Kentucky taxes the income and Illinois cannot. Residency, not the location of the job, drives this answer: Kentucky reaches all of a resident's income, and Illinois has no personal income tax to apply to the part earned inside its borders.
Which state should my employer be withholding for?
Kentucky. Your employer should withhold Kentucky tax rather than Illinois tax on these wages. If a Illinois line is showing on your pay stub, raise it with payroll now rather than at filing time.
Does my Illinois employer's location alone create a Illinois tax obligation?
No. Illinois 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 Illinois are a different matter — those are Illinois-source income and can require a nonresident return.
How current is this?
The Kentucky and Illinois rules on this page were last checked against Kentucky Department of Revenue and Illinois 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.
- Kentucky Department of Revenue — individual income taxaccessed 2026-08-07
- Illinois Department of Revenue — individual income taxaccessed 2026-08-07