Live in Illinois, Work in Montana: Which State Taxes Your Paycheck?
Answer
Two returns, one credit. Montana has the first claim on wages earned inside the state and withholds accordingly. Illinois then taxes you as a resident on everything and gives credit for what Montana already took, capped at what Illinois would have charged on that same income.
Last verified
Two states can lawfully tax the same wages: Montana because the work happened there, Illinois because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the Illinois return, through the credit for taxes paid to another state.
A Illinois resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule CR. The credit is capped at the Illinois tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
What you file
- 1Nonresident return · MontanaForm 2 with the nonresident/part-year schedule
File the Montana nonresident return FIRST — you need the Montana tax figure before you can complete Illinois.
- 2Resident return · IllinoisSchedule CR
File a Illinois resident return reporting all income, then claim the credit for tax paid to Montana. The credit is capped at what Illinois would have charged on that same income, so if Montana taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Illinois | Montana | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — graduated |
| Reciprocity partners | 4 (Form IL-W-5-NR) | 1 (Form MW-4) |
| Convenience rule | No | No |
| Nonresident return | Form IL-1040 with Schedule NR | Form 2 with the nonresident/part-year schedule |
| Credit for other-state tax | Schedule CR | Form 2 (credit for income tax paid to another state) |
| Nonresident safe harbour | 30 days | None published |
| Local income tax | No | No |
| Revenue department | Illinois Department of Revenue | Montana Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Montana and working in Illinois gives:Both states — credit offsets the double tax.
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 → MontanaHome state only
- 1099 contractor: Illinois → MontanaHome state, plus the client state if you work there
- Moved mid-year: Illinois → MontanaTwo part-year returns
Other Illinois pairs
Questions people actually ask
I live in Illinois and work in Montana. Which state takes the tax out of my paycheck?
Two returns, one credit. Montana has the first claim on wages earned inside the state and withholds accordingly. Illinois then taxes you as a resident on everything and gives credit for what Montana already took, capped at what Illinois would have charged on that same income.
Which state should my employer be withholding for?
Montana. The wages are sourced to Montana, so Montana withholding is correct and there is no Illinois withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. Illinois gives residents a credit for tax paid to Montana on the same income, claimed on Schedule CR. The credit is capped at the Illinois tax on that income, so if Montana taxes it more heavily the excess is not refunded by either state.
How current is this?
The Illinois and Montana rules on this page were last checked against Illinois Department of Revenue and Montana 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
- Montana Department of Revenue — individual income taxaccessed 2026-08-07