There laws conflict with each other.
Yes, you can file a joint Illinois return if you are filing a joint federal return. However, NC basis her residency status off of her actual situation without regards to your situation. This means since she lives there she is a resident there and has to file as a resident.
You may find it easier to just file a resident state for yourself for IL and a Non Resident return for NC for the rental income reporting half of it and half of the expenses. Then just have her file a Resident return for NC.
What are my options for filing a joint return with my spouse? Spouses who file a joint federal return may elect to file a joint Illinois return. If you file a joint Illinois return, and one spouse is an Illinois resident while the other is not, both spouses must be treated as Illinois residents (or as part-year residents for the same period).
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