- Let's start with your original question regarding calculation of credit: The credit will be the lower of the state tax liabilities on the same gross income. Differences in tax rate along with differences in how the taxable income is calculated will create different state taxable amounts.
- IL tax is based on your entire income for the year times the IL percentage. So it can look like it is taxing all your income. Line 48 shows the percentage of income earned in IL.
- Due to the calculation differences, IN tax on the income is $1795 and they will not give you credit larger than the IN tax on the same income. IL has a higher tax rate (4.95%0 than IN (3%), so that difference is what you pay for working in IL.
- Add the local tax and you have your return complete.
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