IL-MI reciprocity mostly serves remote employees hired across the state line and Chicago-area residents working in southwest Michigan (New Buffalo, Benton Harbor).
| Scenario | Form To File | Result |
|---|---|---|
| Live IL, work MI | MI-W4 (to skip MI) | No MI withholding. Pay IL tax only. |
| Live MI, work IL | IL-W-5-NR (to skip IL) | No IL withholding. Pay MI tax only. |
OBBBA 2026 (One Big Beautiful Bill Act) raised the federal SALT cap to $40,000. This matters for reciprocity commuters who itemize: your full home-state income tax is now more likely to be fully deductible on federal Schedule A, making the state-level tax difference between your home and work state a real after-tax driver of commute value. Check each state rate: IL top rate 4.95% flat, MI top rate 4.25% flat.
Use the standard MI-W4 and claim the reciprocity exemption as a resident of a reciprocal state (IL). Submit it to your Michigan employer’s payroll. It stays valid until revoked.
File IL form IL-W-5-NR (Employee’s Statement of Nonresidence in Illinois). Illinois withholding stops; you withhold Michigan’s 4.25% flat tax instead and file only the MI-1040.
No. Michigan cities with local income tax (Detroit 1.2% nonresident, Grand Rapids 0.75% nonresident, Lansing, Flint, and others) tax wages earned inside the city regardless of reciprocity. IL residents physically working in those cities still owe the city tax.
Yes. The exemption is residency-based. If your W-2 employer is in one state and you live in the other, file the exemption form so withholding routes to your home state - even if you never set foot in the employer’s state.
File a Michigan nonresident return (MI-1040 with Schedule NR) reporting the wages as exempt under reciprocity to recover the withholding in full. Submit the corrected MI-W4 to payroll so future paychecks withhold Illinois tax.
See exact post-reciprocity paycheck with IL or MI withholding.
Paycheck Calculator →Run the numbers for each state: Illinois Income Tax Calculator · Michigan Income Tax Calculator
Tax calculations are estimates for educational and informational purposes only. This site does not provide tax, legal, or financial advice. Tax laws change frequently. Always consult a qualified tax professional for advice specific to your situation. Data sourced from IRS publications and official state tax authority websites.
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