Guide
The part-year return: which income belongs to which period
Updated
Almost everybody moving states files a part-year return in the move year. A small timing mistake on it is worth real money in both directions.
Question 1
Which state are you leaving?
The mechanism differs completely by state, and the phrase exit tax describes different things in each.
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The rule
Illinois states it cleanly. As a part-year resident you include income from any source while you were a resident, plus the Illinois income you received while you were not.
Most states work the same shape. Worldwide income while resident, state-source income after. So the split date is the single most consequential number on the return.
The form
In Illinois, a part-year resident files Form IL-1040 with Schedule NR, Nonresident and Part-Year Resident Computation of Illinois Tax. That schedule determines the income taxed by Illinois and figures the Illinois tax.
The instructions for that schedule are the document to read before you file, not after a query, and they are published for each tax year.
The two items that land in the wrong period
A property sale. Whether it falls before or after the change of domicile changes which period reports it, and it is frequently the largest single item on the return.
Deferred compensation and equity. A bonus paid after the move for work done before it is commonly sourced to where the work was performed. So are options exercised in the new state on grants earned in the old one.
Two states at once
It is normal for two states to have a claim on the same period, and normal for the resolution to come through a credit rather than through a choice.
What is not normal, and is worth catching early, is two states both treating you as a resident for the same period. That usually means the domicile change is contested or a statutory residence test has caught you, and it is the point at which a research page stops being enough.