Part-year NYC resident moved to Illinois — confirming wage allocation (~44%) and treatment of dividends/capital gains

[jackkgan]

I moved from New York City to Illinois during 2025 and request your help to confirm that the allocation approach I used on my NY part-year return I have incorporated so far is correct. 

Timeline:

• Lived in Brooklyn, NYC from Jan 1, 2025 through June 5, 2025
• Moved permanently to Illinois on June 6, 2025
• Worked fully remotely the entire year for a New York-based employer (never physically worked in NY after leaving)

Workday allocation used on the NY return:

• Total workdays in 2025: 261
• NY workdays while living in NYC: 115
• Workdays after moving to Illinois: 146

So wages were allocated using:

115 ÷ 261 ≈ 44% allocated to NY

Income types during the year included:

• W-2 wages from the NY employer
• brokerage dividends and interest
• capital gains from selling ETFs/stocks
• a small IRA excess-contribution correction distribution

The approach used on the return was:

1. Wages: allocated to NY using the workday method (≈44%).
2. Dividends and interest: treated as intangible income and not allocated to NY after the move.
3. Capital gains from stock sales: treated as intangible income and not allocated to NY after the move.
4. IRA excess contribution correction distribution: allocated based on residency at the time the distribution occurred.
5. After the move to Illinois, investment income was treated as Illinois income.

Questions:

1. For a fully remote employee of a NY employer, is using the workday allocation method (115 ÷ 261 ≈ 44%) the correct way to determine NY-source wages for a part-year resident?

2. Are dividends, interest, and stock capital gains considered intangible income that generally are not NY-source once the taxpayer becomes a nonresident?

3. If stock sales occurred after leaving NY, is it correct that none of those capital gains should be allocated to NY on Form IT-203?

4. For a small IRA excess-contribution correction distribution, is it correct that the income is sourced based on the taxpayer's state of residence when the distribution occurred?

5. Does Illinois generally tax all income received after becoming an IL resident, including investment income realized later in the year?

I mainly want to confirm that allocating about 44% of wages to NY and none of the investment income after the move is consistent with NY part-year resident rules

[MarilynG1 · Accepted solution]

You have allocated your New York Part Year Resident wages correctly.  Keep documentation for your records on how you arrived at days worked in NY.  However, you will generally need to divide your unearned income by the % of time you lived in each state.  Items like interest and dividends are considered to be earned throughout the year if the account remains open, so this would need to be allocated between the two states. 

A stock sale occurring after leaving the state can be allocated to the state you lived in when the sale occurred.  

If you were contributing to an IRA all year, and had an excess contribution, which was withdrawn, you can report the earnings income on the state return you lived in when the distribution occurred, as you mention. 

Illinois taxes income received after you became a resident.  In the case of interest income earned all year, allocate a % based based on time lived there. 

Here's more info on Allocating Income for a Part-Year Resident and IRA Allocations.

@jackkgan