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

[Ephesians3-14]

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??  

[Jim-from-Ohio]

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. 

[Ephesians3-14]

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

[Terry53029]

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

[taxiowa]

I agree.  No reason for add back if AGI doesn't include them to begin with.  I have one holding until this can be sorted out.  Otherwise I will override add back.

[garman22]

Are you saying that Illinois is properly picking up AGI from federal and then ADDING back TIPS to increase AGI further?

[IRonMaN]

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

[Just-Lisa-Now-]

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.

[Ephesians3-14]

Agreed - CA should be fine. No need to include an add back

[Ephesians3-14]

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.

[Ephesians3-14]

That's exactly my point. There should be no issue, but there are NUMEROUS media reports and on Google search that say IL taxpayers need to add back the overtime and tips deduction which is NOT true. Just wanted to make sure I wasn't missing anything.

[BobKamman]

Where on Schedule M is it adding tips back in?  Line 11?  The instructions don't tell you to do that.  It would be a programming error.