If I live in Indiana but work in Illinois how does that affect my taxes? Will every pay check be deductible or will it affect end of year taxes?

[Mike9241]

currently there is no reciprocity between those two states. You will owe taxes in Illinois for the income you earned there. Indiana will tax you on the same income but allow a full or partial credit for the taxes paid to Illinois on the income taxed by both states. 

[xmasbaby0]

Is your employer withholding state tax for IL?   Or for IN?   In general when you live in one state but work in another state, you need to file a NON-resident return first for the state you worked in, and then do a resident state return for the state you live in.   You will get credit from your state for tax you paid to the state you worked in.

https://ttlc.intuit.com/turbotax-support/en-us/help-article/state-taxes/would-file-nonresident-state...

https://ttlc.intuit.com/turbotax-support/en-us/help-article/printers-printing/file-nonresident-state...

[Hal_Al]

Q.  Will every pay check be deductible or will it affect end of year taxes?

A. Ask your employer how they will handle state withholding.  Usually, in that situation, the employer will withhold only IL tax.

Even though IL tax will be withheld, you still need to file an IL non resident return.  The credit that IN gives you for the tax paid to IL should be sufficient that you do not need to have IN tax withheld, from you pay, and you will not owe any IN state tax when you file your IN resident return.  You may still owe IN county income tax.