2023 IL-1040 Schedule CR Instructions

Schedule CR, Credit for Tax Paid to Other States, allows you to take a credit for income taxes you paid to other states on income you received while a resident of Illinois. You are allowed this credit only if you filed a required tax return with the other state. You must use information from the tax return you filed with the other state to complete Schedule CR.

A part-year resident may only take a credit on income earned while a resident of Illinois.

A nonresident may not take a credit on Illinois Schedule CR.

Taxes that qualify for the credit are income taxes you paid to another state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or possession of the United States, or to a political subdivision (e.g., county, city, local) of one of these jurisdictions. No credit is allowed for taxes paid to the federal government or to foreign countries or to their political subdivisions.

To qualify for this credit, a tax must be deductible as state and local income taxes paid on your federal Schedule A, Itemized Deductions, whether or not you actually claimed the deduction. An alternative minimum tax measured by income may qualify. See Publication 111, Illinois Schedule CR for Individuals, for details.

If you earned wages, salaries, tips, or other employee compensation from an employer in Iowa, Kentucky, Michigan, or Wisconsin while you were a resident of Illinois, you are covered by a reciprocal agreement between that state and Illinois and are not taxed by that state on your compensation. However, you may be taxed on other income.

If your employer withheld tax or you paid tax to these states on your compensation, you must claim a refund from that state. You may not claim a credit on Schedule CR for that tax. You must file the appropriate forms with that state to receive a refund of tax withheld in error.

The reciprocal agreements do not prohibit subdivisions of these states from imposing a tax on your compensation. For example, if you were subject to tax by a city in Kentucky while you were an Illinois resident, you may claim a credit for that local tax.

In addition, because of differences in state laws, you may be considered a resident by one of these states and required to pay their income taxes, even though you are an Illinois resident under Illinois law. In that case, you may claim a credit for the tax paid.

When you figure credit for tax paid to other states, you must consider that tax from the other states’ returns may not be calculated in the same manner as on your Illinois return. For a list of formulas that identify the tax forms, line numbers, additions, and subtractions that you must use to compute the other states’ tax for Schedule CR, see Publication 111.

• Visit our website at tax.illinois.gov for assistance, forms or schedules.
• Write us at Illinois Department of Revenue, P.O. Box 19001, Springfield, Illinois 62794-9001.
• Call 1 800 732-8866 or 217 782-3336 (TTY at 1 800 544-5304).
• Visit a taxpayer assistance office - 8:00 a.m. to 5:00 p.m. (Springfield office) and 8:30 a.m. to 5:00 p.m. (all other offices), Monday through Friday.

Enter your name and Social Security number as shown on your Form IL-1040, Individual Income Tax Return.

Illinois Residents - In Column A of each line, except Line 15, enter the amounts exactly as reported on the corresponding line of your federal income tax return or your Form IL-1040. Do not separate your Illinois and non-Illinois portion or exclude any items when completing Column A.

Part-year Residents - In Column A of each line, enter the amounts as reported on the equivalent line of your Schedule NR, Column B. For example, you would enter the amount from Column B, Line 5 of your Schedule NR on Column A, Line 1 of your Schedule CR.

In Column B for each line, include only the portion of an amount included in Column A of that line that is non-Illinois income or deduction, as determined using Illinois’ rules for sourcing income. Do not include any amount that is not included in Column A, or any portion of an amount that is included in Column A unless specifically instructed to do so below or in Publication 111.

Illinois Residents - To determine the amount to enter in Column B of each line, read and follow the specific instructions below.

Part-year Residents - To determine the amount to enter in Column B of each line, apply the specific instructions for each line below to the amount in Column A. Do not include any amount from the period while you were a nonresident. See Publication 111 for specific examples.

Enter the amount of wages not shown as Illinois wages on the state copy of the W-2 form(s) you received. Do not include wages taxed by another state if they are also shown as Illinois wages. Also do not include any wages you received for working in Iowa, Kentucky, Michigan, or Wisconsin while you were an Illinois resident, unless you paid tax to a city or county on these wages.

Interest income you received, other than business interest income, is Illinois income. Do not include any nonbusiness interest.

Business interest income you received as part of a business conducted in Illinois is sourced to Illinois. If this income was received from an Illinois business conducted

• entirely in Illinois, enter zero on this line.
• entirely outside Illinois, enter the amount from Column A.
• from both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.

Dividend income you received, other than business dividend income, is Illinois income. Do not include any nonbusiness dividends.

Business dividend income you received as part of a business conducted in Illinois is sourced to Illinois. If this income was received from an Illinois business conducted

• entirely in Illinois, enter zero on this line.
• entirely outside Illinois, enter the amount from Column A.
• from both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.

Do not enter an amount on this line.

Do not enter an amount on this line.

Business income or loss you received as part of a business conducted in Illinois is sourced to Illinois. If your business income or loss was received from an Illinois business conducted

• entirely in Illinois, enter zero on this line.
• entirely outside Illinois, enter the amount from Column A.
• from both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.

Enter any capital gains or losses, other than business capital gains or losses, you received from the sale of real property or tangible personal property located outside Illinois at the time of the sale or exchange. Nonbusiness capital gains or losses that resulted from your sale of intangibles are sourced to Illinois and cannot be included.

Capital gains or losses you received as part of a business conducted in Illinois are taxed by Illinois. If you received your business income or loss from an Illinois business conducted

• entirely in Illinois, enter zero on this line.
• entirely outside Illinois, enter the amount from Column A.
• from both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of your capital gain or loss, and include the amount from Line 5 of the worksheet.

Other gains or losses you received as part of a business conducted in Illinois are taxed by Illinois. All gains or losses you included on federal Form 4797, Sales of Business Property, are classified as business income.

If this income or loss was received from an Illinois business conducted

• entirely in Illinois, enter zero.
• entirely outside Illinois, enter the amount from Column A.
• from both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.

Do not enter an amount on this line.

Do not enter an amount on this line.

Figure the total amount to enter on this line by adding

• the net amount of income or loss, other than business income, you received from
  • real estate located outside Illinois.
  • tangible personal property, to the extent it was used outside Illinois. Note: You can determine the extent of non-Illinois use of tangible personal property by dividing the number of days the property was outside Illinois during the rental or royalty period in the taxable year, by the total number of days in the rental or royalty period in the taxable year. Multiply the resulting fraction by the net amount of rents or royalties received.
• patents and copyrights (the amount that was used outside Illinois). Note: A patent is used outside Illinois when it is employed in the production, fabrication, manufacturing, or other processing of a product outside Illinois, or when a patented product is produced outside Illinois. A copyright is used outside Illinois when the printing or publication originated outside Illinois.
• income or loss you received from a non-Illinois business. If your business was conducted
  • entirely in Illinois, enter zero.
  • entirely outside Illinois, enter the amount from Column A.
  • both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.
  • income or loss you received from partnerships, S corporations, trusts, and estates as directed by Illinois Schedules K-1-P and K-1-T. Complete the PST Worksheet to figure the amount to include.

All farm income or loss that you included on federal Schedule F, Profit or Loss from Farming, and that you received from an Illinois farm is taxed by Illinois. If your farm income or loss was received

• entirely from Illinois sources, enter zero.
  
• entirely outside Illinois, enter the amount from Column A.
• from both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of your farm income, and include the amount from Line 5 of the worksheet.

Enter the amount of unemployment compensation you received from any state other than Illinois.

Do not enter an amount on this line.

Please include a detailed description of each type of other income on the line provided or on an attached sheet. Do not include any amount in Column B except net operating loss (NOL) carryforwards, other states’ gambling, sports wagering, and lottery winnings, and recoveries of items deducted in prior years.

Note: Payments of winnings from sports wagering are conducted in accordance with the Sports Wagering Act for tax years ending on or after December 31, 2021.

• If your business net operating loss (NOL) was
  • from a partnership or an S corporation, complete the PST Worksheet on Page 6 to figure the amount to include.
  • from a business you conducted entirely in Illinois, do not include this amount.
  • from a business you conducted inside and outside Illinois, figure the non-Illinois portion on the IAF Worksheet, and include the amount from Line 5 of the worksheet.

Follow the instructions on the form.

Write the amount of educator expenses you deducted this year for which the related compensation is allocable to other states. If only a portion of the compensation related to your total business expenses shown in Column A is allocated outside Illinois, allocate the same portion of these expenses in Column B.

Enter the amount of business expenses you deducted this year for which the related compensation is allocable to other states. If only a portion of the compensation related to your total business expenses shown in Column A is allocated outside Illinois, allocate the same portion of these expenses in Column B.

Complete the following calculation to determine your non-Illinois self-employment (NSE) decimal for use on Lines 22, 23, and 24. The NSE decimal may not exceed 1.0 or be less than zero.

Enter the amount of expenses you paid if you are a member of the Armed Forces on active duty and, due to a military order, you move to Illinois because of a permanent change of station. See Federal Form 3903 Instructions.

Complete the following calculation to determine your non-Illinois self-employment (NSE) decimal for use on Lines 22, 23, and 24. The NSE decimal may not exceed 1.0 or be less than zero.

Figure the amount of your non-Illinois deduction for self-employment tax by completing the following calculation, and enter the amount on Line 22, Column B.

Figure the amount of your non-Illinois deduction by completing the following calculation using the NSE decimal, and enter the amount on Line 23, Column B.

Figure the amount of your non-Illinois deduction by completing the following calculation using the NSE decimal, and enter the amount on Line 24, Column B.

If this deduction is for health insurance premiums paid for you (or reimbursed to you) by an S corporation and reported to you as wages, include the amount in Column B if your wages from the S corporation are included in Line 1, Column B.

Enter the penalty amount you paid when you withdrew money from a business savings account earning interest that is allocated outside Illinois. If only a portion of the interest on the account is allocated outside Illinois, allocate the same portion of this penalty here.

Enter the amount from Column A.

Figure the amount of your non-Illinois IRA deduction by completing the calculation below, and enter the result on Line 27, Column B.

Enter the amount from Column A.

Enter the amount from Column A.

Use this line only if the Internal Revenue Service instructs you to include an amount on your federal Form 1040 or 1040-SR, Schedule 1, Line 24 that is not listed as a separate line item on the federal Form 1040 or 1040-SR, Schedule 1, Lines 11 through 23. Include only the amount of unlisted items, not the Line 25 total.

If the federal adjustment is

• an item of income, you may include the subtraction in Column B only if the amount is included as income in Column B on another line of this schedule.
  
• an expenditure related to income, you must include in Column B the same percentage of Column A as the percentage of the total related income included in Column B on any line of this schedule.
• an expenditure unrelated to income, you must include in Column B the amount from Column A.

Follow the instructions on the form.

Interest and dividends, except from a business, are Illinois income. Do not include any nonbusiness interest or dividends.

Federally tax-exempt interest income you received as part of a business conducted in Illinois is taxed by Illinois. If this income was received from an Illinois business conducted

• entirely in Illinois, enter zero.
• entirely outside Illinois, enter the amount from Column A.
• both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.

Include the following:

• any distributive share of additions received from partnerships, S corporations, trusts, and estates as reported on Schedules K-1-P and K-1-T. Complete the PST Worksheet to figure the amount to include.
• any Lloyd’s plan of operation loss if reported on your behalf on Form IL-1065, Partnership Replacement Tax Return, and included in your adjusted gross income.
• any nonbusiness amount you reported on Form IL-4562, Special Depreciation, that resulted from non-Illinois property.
• any business amounts you reported on Form IL-4562 and the addition for Student-Assistance Contribution Credit claimed on Schedule 1299-C, Income Tax Subtractions and Credits. If the amount was incurred in an Illinois business conducted
  • entirely in Illinois, enter zero.
  • entirely outside Illinois, enter the amount from Column A.
  • both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of these amounts, and include the amount from Line 5 of the worksheet.
• recapture of deductions for contributions to Illinois college savings and ABLE plans transferred to an out-of-state plan.
• business expense recapture only if you reported income from an asset or activity as business income in prior years and reported any income earned while you were a nonresident from that asset or activity as nonbusiness income on your Schedule NR for this year.

Follow the instructions on the form.

Do not enter any amount on this line except retirement income paid directly to you as a retired partner included in Column A, but only to the extent that income is included in Line 11, Column B.

Do not enter an amount on this line.

Include the total amount of the following:

• “Bright Start” or “Bright Directions” College Savings Pool contributions and “College Illinois” Prepaid Tuition Program contributions from your Schedule M, Other Additions and Subtractions for Individuals, Line 13.
• Restoration of amounts held under claim of right from your Schedule M, Line 15, are included in Column B to the extent the claim of right income would be included in Column B if you had received that income this year.
• Contributions to a job training project from your Schedule M, Line 16.
• Contributions to a qualified Illinois ABLE account from your Schedule M, Line 20.

Use the instructions for each of the following items to figure the amount to include:

• Enter the amount of the following items from Column A, Line 39 that is included as income in Column B of any line.
  • August 1, 1969, valuation limitation
  • River Edge Redevelopment Zone and High Impact Business Dividend Subtraction
  • Ridesharing money and other benefits
  • Payment of life insurance, endowment, or annuity benefits received
  • Lloyd’s plan of operation income if reported on your behalf on Form IL-1065
  • Illinois Pre-Need Cemetery Sales Act trust income
  • Education loan repayments to primary care physicians
  • Reparations or other amounts received as a victim of persecution by Nazi Germany
  • Interest from obligations of Illinois state and local government
  • Your child’s interest income reported on U.S. Form 8814
• Military pay - Enter the amount of military pay you received for duty in the U.S. Armed Forces. This income must be included in your federal adjusted gross income and in Column B, Line 1.
• U.S. government obligations - Enter the amount of any interest income from U.S. Treasury bonds, bills, notes, savings bonds, and U. S. agency interest you included in Column B, Line 2.
• Distributive share of subtractions from a partnership, S corporation, trust, or estate - Enter the amount reported to you on the Schedule K-1-P or Schedule K-1-T from the partnership, S corporation, trust, or estate. Complete the PST worksheet on Page 6 to figure the amount to include.
• Expenses of federally tax-exempt income and federal credits
  For expenses related to
  • federal credits, multiply the amount in Column A by the percentage of the federally-allowed portion of these deductions included in Column B of Line 33.
  • income that is exempt from federal taxation, multiply the amount in Column A by the percentage of that income included in Column B for the line on which this income was added back to your base income.
• Special Depreciation subtraction - Enter any amount you reported on Form IL-4562, Special Depreciation. If this depreciation was incurred in a business conducted
  • entirely in Illinois, enter zero.
  • entirely outside Illinois, enter the amount from Column A.
  • both inside and outside Illinois, complete the IAF Worksheet to figure the non-Illinois portion of that income, and include the amount from Line 5 of the worksheet.
• Recovery of items previously deducted on federal Form 1040, Schedule A - Enter any amount from Column A that is included as income in Column B, Line 15.
• Non-U.S. bond interest - Enter the amount of any interest income from bonds issued by the governments of Guam, Puerto Rico, or the Virgin Islands, or the mutual mortgage insurance fund that you included in Column B, Line 2 or Line 34.
• Railroad sick pay and railroad unemployment - Enter any amount from Column A that is included as income in Column B, Line 1.
• Unjust imprisonment compensation awarded by Illinois Court of Claims - Enter zero on this line.
• Distributions from “Bright Start,” “College Illinois,” and “Bright Directions” College savings plans - Enter zero on this line.

Follow the instructions on the form.

Follow the instructions on the form.

Follow the instructions on the form.

If you are claiming a credit for tax paid to Iowa, Kentucky, Michigan, or Wisconsin, check the box for the appropriate state. See “What if I earned income in Iowa, Kentucky, Michigan, or Wisconsin?” under “General Information” for more details.

Follow the instructions on the form. Enter the total tax you paid to all other states (including tax paid to cities or other local government) minus all credits allowed, except credits for payments you actually made to the other states or payments made on your behalf. For full-year residents, you would report 100% of the taxes paid.

For a part-year resident, include only the tax on income earned or received while an Illinois resident. For example, you and your spouse moved to Illinois from Indiana at the beginning of April. You worked in Indiana the entire year, earning $30,000 in wages evenly throughout the year. Your spouse worked in Indiana the entire year, earning $24,000 in wages evenly throughout the year. Of your total wage income, $40,500 of such income was earned during the period you were an Illinois resident. Your only source of income taxable in Indiana is your $54,000 of wage income. You paid $1,000 in income tax to Indiana. The amount of Indiana tax you may include on Line 51 is determined as follows:

$1,000 × ($40,500 ÷ $54,000) = $750.

Follow the instructions on the form.