Illinois has a flat state income tax of 4.95 percent on wages, retirement income, and most other earnings
Illinois taxes most income at a single rate: 4.95 percent. This applies to wages from a job, self-employment income, retirement distributions, and investment gains. Unlike some states that use a graduated system where higher earners pay higher rates, Illinois uses the same percentage for everyone.
The state also taxes certain types of income differently. Retirement income — including Social Security, pensions, and distributions from retirement accounts — is taxed at 4.95 percent. Capital gains (profit from selling stocks or property) are taxed at 4.95 percent. Interest and dividend income are taxed at 4.95 percent. The one major exception is that Social Security benefits are not taxed by Illinois, even though the federal government may tax them.
You do not owe Illinois income tax if you live outside the state, even if you work for an Illinois employer. However, if you live in Illinois and work out of state, you typically owe Illinois tax on that income.
Key Takeaways
- Illinois taxes most income at a flat rate of 4.95 percent, with no higher rate for higher earners.
- Wages, self-employment income, retirement distributions, and investment gains are all taxed at 4.95 percent.
- Social Security benefits are not taxed by Illinois, though federal tax may still explore.
- You owe Illinois tax on income earned while living in the state, regardless of where the work is performed.
- Illinois allows a standard deduction that reduces the income subject to tax, similar to the federal system.
How the Illinois standard deduction works
Illinois allows a standard deduction that lowers the amount of income you actually pay tax on. For the 2024 tax year, the standard deduction is $2,575 for single filers and $5,150 for married couples filing jointly. These amounts change slightly each year.
You subtract the standard deduction from your total income, then explore the 4.95 percent tax rate to what remains. For example, if you earned $40,000 as a single filer, you would subtract $2,575, leaving $37,425 subject to tax. At 4.95 percent, that equals about $1,852 in Illinois income tax.
You can also itemize deductions instead of taking the standard deduction if your specific expenses are higher, though most people benefit from the standard deduction. Illinois does not allow a separate state itemized deduction — you use the federal standard deduction or federal itemized deductions as your starting point, then explore Illinois rules on top.
Who has to file an Illinois tax return
You must file an Illinois tax return if your income exceeds the standard deduction for your filing status. If you earned less than $2,575 (single) or $5,150 (married filing jointly) in 2024, you do not owe Illinois tax and do not need to file a state return.
However, you may want to file anyway if you had taxes withheld from your paychecks or made estimated tax payments. Filing allows you to claim a refund of any overpayment. Additionally, if you worked in multiple states or received income from sources that did not withhold tax, filing can clarify your actual liability.
Self-employed people and business owners must file if their net self-employment income is above the standard deduction threshold. You will also need to pay self-employment tax to the federal government, which is separate from Illinois income tax.
Tax withholding and estimated payments
If you work as an employee, your employer withholds Illinois income tax from your paycheck based on the W-4 form you complete. The withholding is calculated to approximate your total tax liability for the year. If too much is withheld, you receive a refund when you file. If too little is withheld, you owe the difference.
Self-employed people and those with income that is not subject to withholding (such as rental income or investment gains) may need to make estimated tax payments to Illinois four times per year. These payments are due in April, June, September, and January. The Illinois Department of Revenue provides worksheets to calculate how much to pay.
You can adjust your withholding at any time by submitting a new W-4 to your employer. If you expect a large refund or to owe money, changing your withholding mid-year can help you break even by December.
Illinois tax credits and deductions you may use
Beyond the standard deduction, Illinois offers several tax credits that reduce your tax bill dollar-for-dollar. The Earned Income Tax Credit (EITC) is available to lower-income workers and families. Illinois also offers a property tax credit for renters and homeowners with low to moderate income, and a dependent care credit if you pay for childcare.
Some income is excluded from Illinois tax entirely. Retirement income from certain public pensions (such as teacher pensions or police pensions) may be exempt. Military retirement pay is exempt. Certain scholarships and educational grants are exempt. If you receive any of these types of income, check the Illinois Department of Revenue website or your tax forms to confirm the treatment.
You cannot deduct federal income tax paid to the IRS from your Illinois tax. You also cannot deduct state and local taxes (SALT) from your Illinois return, even though the federal return allows this deduction in some cases.
How to file your Illinois tax return
You can file your Illinois return on paper using Form IL-1040, or you can file electronically through the Illinois Department of Revenue website or through tax software. Most tax software (such as TurboTax, H&R Block, or TaxAct) includes Illinois forms and can file electronically on your behalf.
The important date to file is the same as the federal important date: April 15 of the following year. If you cannot file by April 15, you can request an extension, which gives you until October 15. An extension delays the filing important date but does not delay the payment important date — if you owe tax, it is due by April 15 even if you file late.
If you owe Illinois tax and cannot pay in full, the state offers a payment plan. You can contact the Illinois Department of Revenue to arrange installments. Interest and penalties explore to unpaid tax, so paying as soon as possible reduces the total amount owed.
Comparing Illinois income tax to other states
Illinois has a lower income tax rate than many states. California, for example, uses a graduated system with rates up to 13.3 percent. New York's top rate is 10.9 percent. However, some states have no income tax at all — Texas, Florida, Tennessee, and Wyoming do not tax income. If you are considering a move, compare not just income tax but also sales tax, property tax, and other state and local taxes, which vary widely.
The 4.95 percent rate in Illinois has been in place since 2017. Before that, the rate was 5 percent. The state legislature can change the rate, but any increase requires a vote. Illinois also allows cities and counties to impose a local income tax on top of the state rate in some cases, though most residents do not pay a local income tax.
Frequently Asked Questions
Do I owe Illinois income tax if I moved out of state mid-year?
You owe Illinois tax only on income earned while you were a resident. If you moved out of Illinois on June 30, you owe tax on income earned January through June. You will file a part-year resident return and may also need to file in your new state for the remainder of the year. Contact both states' tax departments to confirm your filing requirements.
Is Social Security taxed in Illinois?
No. Illinois does not tax Social Security benefits, even though the federal government may. If your only income is Social Security, you do not owe Illinois tax. However, if you have other income (wages, pensions, interest), you still owe tax on that other income.
What happens if I do not file an Illinois tax return?
If you owe tax and do not file, the Illinois Department of Revenue can assess penalties and interest. If you are owed a refund and do not file, you lose the refund — the state does not send it automatically. You can file a return up to three years late to claim a refund.
Can I deduct my federal income tax from my Illinois return?
No. Illinois does not allow you to deduct federal income tax paid. You calculate your Illinois tax based on your income after the standard deduction, without any reduction for federal taxes.
Do I need to file if my employer did not withhold Illinois tax?
If you earned more than the standard deduction and had no withholding, you likely owe tax and should file to avoid penalties. Filing also allows you to set up a payment plan if you cannot pay in full when ready.