Illinois - Requires Tips to be Added Back - WHY???

Forum|Forum|5 months ago
February 2, 2026
4 replies
31 views

OK maybe I'm missing something here but...

I have a client whose W-2 has $3,500 in Box 1. Then in Box 3 and 5 it shows $3,200.

Box 7 (Tips) shows $300 in tips. So, I deducted the tips on Schedule 1-A. (She's eligible)

AGI in this case is $3,500 because there is no other income on this tax return.

On the Illinois return, it starts with AGI (which of course includes the $3,500 above).

I'm not understanding why you would EVER have to add back on the IL-1040 the tips that were deducted on the Federal tax return since that Schedule 1-A deduction takes place AFTER AGI. Am I missing something??

ProSeries Professional

Jim-from-Ohio

Intuit Community Champion

Illinois does not recognize a "no tax on tips" policy at the state level. As of early 2026, Illinois has opted out of the federal exemption, meaning all tips remain subject to the full state income tax (4.95%) and must be reported, despite any federal-level changes.

E

Ephesians3-14Author

Level 7

Agreed - but Illinois starts with AGI, which already includes tips. So it's irrelevant for Illinois tax purposes, unless I'm missing something.

T

Terry53029

Intuit Community Champion

If you agree that IL does not conform to no tax on tips, and uses AGI which does not include the deduction for tips, what is your issue

IRonMaN

Level 15

Stupid question, but has anybody called support about the issue?

Slava Ukraini!

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Ephesians3-14Author

Level 7

It's not a support issue. It's a matter of confusion on media reports that indicate you must add back overtime and tips deduction to the IL 1040. That is NOT true because Illinois starts with AGI.

Just-Lisa-Now-

Intuit Community Champion

I just double checked CA last week to make sure it wasn't adding them back, CA starts with Fed AGI as well, so even though they don't conform, there sholdn't be an add back. CA is working correctly.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪