Live in Oregon, Work in Illinois: Which State Taxes Your Paycheck?
Answer
Both states tax the same wages, and a credit undoes the overlap. Illinois withholds as your work state and you file a Illinois nonresident return; Oregon taxes residents on all income, so you also file at home and claim the credit for tax paid to Illinois. File Illinois first.
Last verified
Two states can lawfully tax the same wages: Illinois because the work happened there, Oregon because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the Oregon return, through the credit for taxes paid to another state.
A Oregon resident taxed by another state on the same income claims the credit for taxes paid to other states on Schedule OR-ASC-NP. The credit is capped at the Oregon 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 Oregon.
- 2Resident return · OregonSchedule OR-ASC-NP
File a Oregon resident return reporting all income, then claim the credit for tax paid to Illinois. The credit is capped at what Oregon 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
| Oregon | Illinois | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — flat |
| Reciprocity partners | None | 4 (Form IL-W-5-NR) |
| Convenience rule | No | No |
| Nonresident return | Form OR-40-N | Form IL-1040 with Schedule NR |
| Credit for other-state tax | Schedule OR-ASC-NP | Schedule CR |
| Nonresident safe harbour | None published | 30 days |
| Local income tax | Yes | No |
| Revenue department | Oregon 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 Oregon 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: Oregon → IllinoisHome state only
- 1099 contractor: Oregon → IllinoisHome state, plus the client state if you work there
- Moved mid-year: Oregon → IllinoisTwo part-year returns
Other Oregon pairs
Questions people actually ask
I live in Oregon and work in Illinois. Which state takes the tax out of my paycheck?
Both states tax the same wages, and a credit undoes the overlap. Illinois withholds as your work state and you file a Illinois nonresident return; Oregon taxes residents on all income, so you also file at home and claim the credit for tax paid to Illinois. File Illinois 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 Oregon 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. Oregon gives residents a credit for tax paid to Illinois on the same income, claimed on Schedule OR-ASC-NP. The credit is capped at the Oregon tax on that income, so if Illinois taxes it more heavily the excess is not refunded by either state.
How current is this?
The Oregon and Illinois rules on this page were last checked against Oregon 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.
- Oregon Department of Revenue — individual income taxaccessed 2026-08-07
- Illinois Department of Revenue — individual income taxaccessed 2026-08-07