Relocating Between Illinois and Iowa in February: Income Tax Implications

Individuals who move between Illinois and Iowa in February may wonder if they need to pay income tax in both states during that year. This article explores the specifics of state tax obligations and highlights key considerations that can affect your tax situation.

Overview of Dual State Tax Obligations

Yes, if you relocate from Illinois to Iowa in February, you are required to file tax returns in both states. However, you can claim a credit for the taxes paid in one state on your current state tax form, helping to mitigate the burden.

Part-Year Resident Returns

When you relocate between states, you are considered a part-year resident in both Illinois and Iowa for the tax year. This means you need to file a part-year resident return if you earned income, received investment income, or were employed in both states within that year.

Income Thresholds and Exemptions

There are income thresholds that can exempt you from filing state tax returns. For example, if your income while living in Illinois during the year was less than $2,175, you would most likely not need to file an Illinois return. However, it is important to check specific exemptions for your particular situation as these can vary.

Pro-rated Tax Liability

Your tax liability is calculated based on the amount of time you spent in each state. This means that even if you only spent two months in Illinois, you would need to pay a proportion of your income tax there, and a proportion in Iowa. The prorated amounts will be less than if you had resided in each state throughout the year, but you are still required to file returns in both states.

Complexity and Considerations

Simply allocating the 2-month period’s worth of income to Illinois and the remaining 10 months to Iowa is overly simplistic. You need to determine your specific share of income based on your actual presence in each state and the nature of your income.

Free Tax Programs and Paid Preparers

If you find the process of filing both state returns overwhelming, consider using free online tax programs. Many of these programs can help you navigate the complex calculations and ensure you meet all state tax obligations. Additionally, a paid preparer can provide professional assistance and ensure accuracy in your returns.

Illinois State Tax Considerations

Some viewers mentioned that Illinois state tax forms can be particularly challenging. If you lived in Illinois for extended periods, you may be well aware of the intricacies involved. However, it is crucial to calculate your state tax liability accurately. Illinois insists on its share of income tax if earned within its jurisdiction, even if it is a part-year resident.

Conclusion

Relocating between Illinois and Iowa in February requires filing tax returns in both states, but the process can be simplified through proper allocation of income and use of available resources. Understanding your specific circumstances and seeking professional advice can help you manage the complexities of dual state tax obligations effectively.

Additional Resources

For further assistance, consider exploring the following resources:

IRS International Tax Resources Illinois Department of Revenue Professional Tax Preparation Services for Iowa and Illinois