I live in Indiana but work in Illinois. Do I need to "Allocate your federal income" to Illinois?

If you work in Illinois, you should allocate earnings and the state taxes to the state to Illinois.  You should also allocate all income to your home state of Indiana.  You will then get a credit for the taxes paid in Illinois on your Indiana tax return.

 

You have to be in a particular TurboTax state income tax return to get to the Credit Paid To Other States or Country screens. 
 

When you are preparing more than one state income tax return, each state will ask if you paid taxes to another state.

 

Once you've determined that you need to file a part-year/nonresident state return, the first thing you want to do is make sure you've filled out the Personal Info section correctly:

1. With your return open, click the first tab, Personal Info.
2. Continue to the Your Personal Info Summary screen.
3. Scroll down to the last section, Other State Income, and click Edit.
4. At the Did you make money in any other states? question, answer Yes and make sure your nonresident state(s) are selected from the drop-down.
5. Click Continue to return to the Your Personal Info Summary screen.

After you finish your federal return, you'll automatically move to the State Taxes tab, where you'll see your nonresident state(s) listed in addition to your resident state.

To ensure accurate calculations, we strongly recommend preparing your nonresident state return before you prepare any resident or part-year state returns. More tips:

• Select the long form (if the option is available) even if TurboTax defaults to the short form.
• Only report the income attributable to the nonresident state.
• If preparing a nonresident return solely to recover erroneous tax withholdings, enter 0 on the screen that asks for the amount of income earned in that state. This will eliminate your tax liability for that state, resulting in a full refund.
• If you live in a reciprocal state, consider submitting an exemption form to your employer so you don't have to file a nonresident return next year.

Related Information: How do I allocate (split) income for a part-year state return?

 

This answer was provided by Tax expert @HelenaC  How do i get credit for taxes paid to another state

 

If this does not completely answer your question, please contact us again and provide some additional details.

 

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