Live in New Jersey, Work in Illinois: Which State Taxes Your Paycheck?
Answer
Illinois withholds and New Jersey credits. Without an agreement between them, both states are entitled to tax income earned in Illinois by a New Jersey resident. The mechanism that stops you paying twice is the credit on the New Jersey resident return, which is why the Illinois return has to be completed first.
Last verified
Without an agreement between New Jersey and Illinois, the overlap is handled after the fact rather than prevented. That is why the filing order matters: the Illinois figure is an input to the New Jersey return, so completing New Jersey first means doing it twice.
A New Jersey resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule NJ-COJ. The credit is capped at the New Jersey 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 · IllinoisForm IL-1040 with Schedule NR
File the Illinois nonresident return FIRST — you need the Illinois tax figure before you can complete New Jersey.
- 2Resident return · New JerseySchedule NJ-COJ
File a New Jersey resident return reporting all income, then claim the credit for tax paid to Illinois. The credit is capped at what New Jersey would have charged on that same income, so if Illinois taxes it at a higher rate the difference is not refunded.
The two states, side by side
| New Jersey | Illinois | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — flat |
| Reciprocity partners | 1 (Form NJ-165) | 4 (Form IL-W-5-NR) |
| Convenience rule | Only against convenience-rule states | No |
| Nonresident return | Form NJ-1040NR | Form IL-1040 with Schedule NR |
| Credit for other-state tax | Schedule NJ-COJ | Schedule CR |
| Nonresident safe harbour | None published | 30 days |
| Local income tax | No | No |
| Revenue department | New Jersey Division of Taxation | Illinois Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Illinois and working in New Jersey 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: New Jersey → IllinoisHome state only
- 1099 contractor: New Jersey → IllinoisHome state, plus the client state if you work there
- Moved mid-year: New Jersey → IllinoisTwo part-year returns
Other New Jersey pairs
Questions people actually ask
I live in New Jersey and work in Illinois. Which state takes the tax out of my paycheck?
Illinois withholds and New Jersey credits. Without an agreement between them, both states are entitled to tax income earned in Illinois by a New Jersey resident. The mechanism that stops you paying twice is the credit on the New Jersey resident return, which is why the Illinois return has to be completed first.
Which state should my employer be withholding for?
Illinois. The wages are sourced to Illinois, so Illinois withholding is correct and there is no New Jersey 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. New Jersey gives residents a credit for tax paid to Illinois on the same income, claimed on Schedule NJ-COJ. The credit is capped at the New Jersey tax on that income, so if Illinois taxes it more heavily the excess is not refunded by either state.
How current is this?
The New Jersey and Illinois rules on this page were last checked against New Jersey Division of Taxation 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.
- New Jersey Division of Taxation — individual income taxaccessed 2026-08-07
- New Jersey Division of Taxation — Convenience of the Employer Ruleaccessed 2026-08-07
- Illinois Department of Revenue — individual income taxaccessed 2026-08-07