Live in Illinois, Work in Iowa: Which State Taxes Your Paycheck?
Answer
File Form 44-016 and Iowa takes nothing. Under the reciprocal agreement between Illinois and Iowa, wages you earn in Iowa are taxable only by Illinois. The certificate goes to your employer rather than to a revenue department, and it turns two potential returns into one.
Last verified
A reciprocity agreement is a deal between two revenue departments about which of them withholds. Around thirty such agreements exist across sixteen jurisdictions, and Illinois and Iowa hold one — which is why this commute produces one return instead of two.
Iowa's only reciprocal agreement is with Illinois. An Illinois resident working in Iowa files Iowa Form 44-016 with the employer and pays Illinois instead.
The certificate goes to your employer's payroll department, not to Iowa Department of Revenue, and it is not retroactive — filing it in June does not recover Iowa tax withheld in January. That money comes back only by filing a Iowa nonresident return for the year and claiming a refund.
Iowa also has a layer below the state one, and it is the layer that survives every agreement: Many Iowa school districts levy a surtax calculated as a percentage of state income tax. It is reported on the state return rather than separately.
What you file
- 1Give to your employer · IowaForm 44-016
Give your employer Form 44-016 so Iowa stops withholding. This goes to the employer, not to Iowa Department of Revenue — and it is not retroactive, so file it before the first paycheck of the year.
- 2Resident return · Illinois
File a Illinois resident return reporting all of your income, including the wages earned in Iowa.
The two states, side by side
| Illinois | Iowa | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — flat |
| Reciprocity partners | 4 (Form IL-W-5-NR) | 1 (Form 44-016) |
| Convenience rule | No | No |
| Nonresident return | Form IL-1040 with Schedule NR | Form IA 1040 with Schedule IA 126 |
| Credit for other-state tax | Schedule CR | Form IA 130 |
| Nonresident safe harbour | 30 days | None published |
| Local income tax | No | Yes |
| Revenue department | Illinois Department of Revenue | Iowa Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Iowa and working in Illinois gives:Reciprocal agreement — file the exemption form.
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.
- Remote worker: Illinois → IowaHome state only
- 1099 contractor: Illinois → IowaHome state, plus the client state if you work there
- Moved mid-year: Illinois → IowaTwo part-year returns
Other Illinois pairs
Questions people actually ask
I live in Illinois and work in Iowa. Which state takes the tax out of my paycheck?
File Form 44-016 and Iowa takes nothing. Under the reciprocal agreement between Illinois and Iowa, wages you earn in Iowa are taxable only by Illinois. The certificate goes to your employer rather than to a revenue department, and it turns two potential returns into one.
Which state should my employer be withholding for?
Illinois. Your employer should withhold Illinois tax rather than Iowa tax on these wages, but only once you have given payroll Form 44-016 — the exemption is not automatic and it does not apply retroactively. If a Iowa line is showing on your pay stub, raise it with payroll now rather than at filing time.
What if Iowa tax was already withheld from my pay?
File Form 44-016 with your employer to stop it going forward, then recover what was already taken by filing a Iowa nonresident return for that year and claiming a refund of the full amount. Illinois will still expect its own tax on the same wages, so do not treat the refund as a windfall.
How current is this?
The Illinois and Iowa rules on this page were last checked against Illinois Department of Revenue and Iowa 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
- Iowa Department of Revenue — individual income taxaccessed 2026-08-07