Illinois Schedule CR: Who Qualifies and How to File
For Illinois residents with out-of-state income, Schedule CR offers a way to mitigate double taxation by crediting taxes paid to another jurisdiction.
Illinois Schedule CR, the Credit for Tax Paid to Other States, prevents double taxation for residents who earn income and pay taxes in another state. This credit reduces your Illinois tax liability, ensuring the same income is not fully taxed by both Illinois and another jurisdiction. It is a nonrefundable credit, which means it can reduce your tax to zero, but you cannot get a refund for any excess amount.
Who Can Claim the Credit
To be eligible for the credit, you must have been an Illinois resident when you earned the income. The credit is for income taxes paid to another state, a U.S. territory, or a city or county, as long as the tax is based on income. You cannot claim a credit for taxes paid to the federal government or foreign countries. For the credit to apply, the same income must be taxable in both Illinois and the other jurisdiction.
Illinois has reciprocal agreements with Iowa, Kentucky, Michigan, and Wisconsin. If your only out-of-state income is from wages, salaries, tips, or commissions from one of these states, you should not file Schedule CR. Instead, you must file a tax return with that state to get a refund of any taxes withheld, as you are exempt from that state’s income tax.
The credit may be available for other types of income from these reciprocal states or any income from non-reciprocal states. Part-year residents can claim the credit, but only on income earned while living in Illinois. Nonresidents of Illinois are not permitted to claim this credit.
Information and Documents Needed to Complete Schedule CR
Before starting Schedule CR, you must gather a signed, complete copy of the income tax return you filed with the other state. You will also need your completed Illinois Form IL-1040, as figures from it are required for the calculation. Having your federal tax return is also helpful as some Illinois form lines correspond to federal amounts.
The form separates your total income into Illinois and non-Illinois portions. For example, you will enter your total wages, interest, and business income in one column and then specify the amount of that income earned and taxed in the other state in a separate column.
You will need to pull specific figures from the other state’s return, including the adjusted gross income from that state and the actual tax liability you paid. The tax liability is the amount of tax calculated on the income, not the amount of tax withheld from your paychecks.
Calculating the Credit Limitation
The credit you can claim is limited by Illinois law to prevent it from offsetting tax on income earned only in Illinois. The final credit is the lesser of two amounts: the actual income tax you are liable for in the other state, or the amount of Illinois tax due on that same income.
To determine the Illinois tax attributable to the out-of-state income, Schedule CR uses a specific formula. First, you calculate a decimal by dividing your income that was taxed by the other state by your total Illinois base income. You then multiply this decimal by your total Illinois tax liability from Form IL-1040.
For instance, assume your Illinois base income is $100,000 and your Illinois tax is $4,950. If $20,000 of that income was taxed by Missouri, you would divide $20,000 by $100,000 to get a decimal of 0.20. You then multiply your $4,950 Illinois tax by 0.20, resulting in $990. This $990 is the Illinois tax attributable to the Missouri income. If you paid $1,100 in tax to Missouri, your credit is limited to $990; if you paid only $800, your credit would be $800.
Filing Schedule CR with Your Illinois Return
After completing Schedule CR, enter the final credit amount on the designated line of your Form IL-1040 to reduce your overall Illinois tax liability. If you file a paper return, you must attach Schedule CR to your Form IL-1040.
For both paper and electronic filers, you are not required to submit a copy of the other state’s tax return with your Illinois filing. However, you must maintain a complete copy of that return and the completed Schedule CR in your personal records. The Illinois Department of Revenue may request these documents later to verify the credit, so it is important to have them available.