Illinois permanent Resident but do on-site contract work in Iowa. Employer (in Michigan) withholds Illinois taxes

[LKarkos]

I work an indefinite contract assignment in Iowa where I work on-site.  While I rent an apartment in Iowa, I still get my bills, voter registration, driver's license, car insurance, doctor, etc.  all remain in Illinois.   My employment agency with the contract (in Michigan) withholds Illinois taxes.  Illinois.

1-A. Illinois and Iowa have a reciprocity agreement.  Do I have to file taxes in both Iowa and Illinois?

1-B. Do I file as a resident in Illinois (where my permanent residence is and where my withholding was sent)  and a non-resident in Iowa or do I file as a Iowa resident and then a non-resident return for Illinois?

1-C.  Do I even have to file a non-resident return in either state?

2.  I have a primary car in Illinois, but bought a second car in Iowa for use when I am on-site there. I paid $2399 in sales taxes for this second car for use in Iowa.  Can I deduct the state sales tax in either state?

[TomD8]

Your employer is doing it correctly.  The reciprocity agreement between Illinois and Iowa means that Illinois residents who have W-2 wages from Iowa only have to pay taxes in their home state.  If your only income from Iowa is w-2 wages or salary, then you only have to file taxes in your home state of Illinois.  You do not have to file an Iowa return.

[LKarkos]

Thank you!

Can I still enter the Iowa sales tax I paid when filing my Illinois taxes?

[TomD8 · Accepted solution]

No.  Sales taxes paid to another state are not deductible on your Illinois state return.  Sales taxes paid may be deductible on your federal return if you itemize, subject to IRS limits.

[LKarkos]

That's what I feared, but was secretly hoping the reciprocity between Illinois and Iowa would allow the deduction.  

Thank you for your answers.