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Question for the Money Doctors

Question submitted on Apr 20, 2010.

Question

I am a resident of Illinois, but claimed unemployment through Iowa last year. When filing my taxes, it came to my attention that both Iowa and Illinois are taxing the unemployment income from Iowa. Illinois states that they have the right to tax it because it is received by an Illinois citizen, and Iowa claims they get to tax it because it is Iowa generated income that does not fall under the reciprocal agreement between the two States. Is this correct that I can be taxed twice for the same compensation? Thank you.

Answer

Since I am not a resident of either Iowa or Illinois, I am not as familiar with the specifics of the taxability of unemployment at the state level in those states.  You would usually draw unemployment from your resident state, assuming that you worked in your resident state.

However, even if you do receive unemployment from the state of Iowa and are required to pay tax in Iowa, you should receive a credit against your Illinois tax for the tax you paid to the state of Iowa.


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