Illinois payroll tax rates for employees and employers

Illinois has a flat 4.95% income tax rate that applies to wages. This is the state income tax withheld from your paycheck. Unlike some states that use brackets based on how much you earn, Illinois takes the same percentage from everyone, regardless of income level.

On top of state income tax, you also pay Social Security tax (6.2%) and Medicare tax (1.45%) — these are federal taxes, not Illinois-specific. Self-employed workers pay both the employee and employer portions of these federal taxes, which doubles the rate to 12.4% for Social Security and 2.9% for Medicare.

If you earn over $200,000 as a single filer (or $250,000 if married filing jointly), you owe an additional 0.9% Medicare tax on the income above that threshold. This is also federal, not state.

Key Takeaways

  • Illinois state income tax is a flat 4.95% on all wages, with no brackets or deductions that lower your rate based on income.
  • Federal Social Security (6.2%) and Medicare (1.45%) taxes are withheld from every paycheck in Illinois, the same as in every other state.
  • Your employer also pays matching Social Security and Medicare taxes, but these do not appear on your paycheck.
  • Illinois has no local income tax in most areas, though a small number of municipalities impose their own tax on wages.

How the 4.95% Illinois state tax is withheld

Your employer calculates the 4.95% on your gross wages — the amount before any deductions. This means the tax is taken from your pay before you see it, and it appears as a line item on your pay stub labeled "IL tax" or "Illinois income tax."

The amount withheld depends on your gross pay and how often you are paid. If you earn $2,000 per paycheck, you owe roughly $99 in Illinois state tax per check. If you are paid weekly, that happens 52 times a year; if biweekly, 26 times.

You cannot reduce the 4.95% rate through deductions or credits on your paycheck itself. However, when you file your Illinois tax return each year, you may be may have access to to a refund if too much was withheld, or you may owe more if too little was taken out.

Federal payroll taxes withheld alongside state tax

Your paycheck also shows federal income tax withholding, which is separate from the 4.95% state rate. Federal withholding depends on your W-4 form — the form you fill out when you start a job that tells your employer how much federal tax to take out.

Social Security and Medicare are not optional. Social Security tax is 6.2% on wages up to $168,600 per year (this cap changes annually). Once you hit that cap in a calendar year, no more Social Security tax is withheld for the rest of that year. Medicare tax is 1.45% on all wages with no cap.

If you earn over the high-income threshold, the additional 0.9% Medicare tax applies automatically — your employer should withhold it without you having to do anything.

What employers pay on top of your wages

Your employer pays payroll taxes that do not come out of your paycheck. These are employer-side Social Security (6.2%) and Medicare (1.45%) taxes on your wages. The employer sends these to the federal government separately.

Illinois does not require employers to pay a state payroll tax beyond withholding the 4.95% income tax from employees. However, employers must pay federal unemployment insurance (FUTA) and Illinois unemployment insurance (SUTA) on wages, which fund the state unemployment system.

The SUTA rate varies by employer and industry, typically ranging from 0.1% to 5.4% of wages, depending on the employer's history of claims and other factors. This is not withheld from your pay — it is a cost the employer bears.

Local income taxes in Illinois

Most of Illinois has no local income tax. However, a small number of municipalities have enacted their own tax on wages earned within their borders. The city of Chicago does not have a local income tax, but some smaller cities do.

If you work in a municipality with a local tax, your employer should withhold it along with state and federal taxes. The rate and rules vary by location. Check with your employer or the municipality's finance office if you are unsure whether a local tax applies to your wages.

Local taxes are separate from the 4.95% state rate and do not reduce your state tax obligation.

How to check your paycheck for accuracy

Your pay stub should list each tax withheld separately: Illinois state income tax, federal income tax, Social Security, and Medicare. Add these up and compare them to what you expect based on your gross pay.

If the Illinois state tax line shows more or less than roughly 4.95% of your gross pay, ask your payroll department to review your withholding. Errors happen — a wrong tax code or a data entry mistake can cause over- or under-withholding.

Keep your pay stubs throughout the year. When you file your Illinois tax return, you will need to know your total state income tax withheld. If you change jobs mid-year, you may have multiple W-2 forms, and each one will show the state tax withheld by that employer.

Self-employed and business owner tax rates

If you are self-employed, you still owe the 4.95% Illinois state income tax on your net business income. You also owe both the employee and employer portions of Social Security and Medicare — 12.4% and 2.9% respectively — which is called self-employment tax.

Self-employed workers pay these taxes when they file their federal tax return, usually quarterly through estimated tax payments. Illinois does not require quarterly estimated state tax payments, but you should set aside money for the 4.95% state tax owed when you file your annual return.

You may be able to deduct half of your self-employment tax on your federal return, which lowers your taxable income. Illinois does not allow this deduction on the state return, so your state tax is based on your full net income.

Frequently Asked Questions

Does Illinois have a state income tax?

Yes. Illinois has a flat 4.95% state income tax on wages, retirement income, and other sources. This rate applies to all residents and has been in place since 2017. There are no deductions or credits that change your rate on the paycheck itself.

Is the 4.95% the only tax taken from my paycheck?

No. You also pay federal income tax (the amount depends on your W-4), Social Security (6.2%), and Medicare (1.45%). If you work in a municipality with a local income tax, that is withheld too. The 4.95% is only the Illinois state portion.

Can I reduce my Illinois state tax withholding?

No. The 4.95% rate is flat and applies to all wages. You cannot adjust it on your paycheck. However, if too much is withheld during the year, you may receive a refund when you file your Illinois tax return.

What is the Social Security wage cap?

In 2024, Social Security tax stops being withheld once you earn $168,600 in a calendar year. This cap increases annually. Medicare tax has no cap and continues on all wages throughout the year.

Do I owe Illinois state tax if I work in another state?

Illinois taxes residents on income earned anywhere. If you work in another state, you may owe tax to both Illinois and that state. File your Illinois return and claim a credit for taxes paid to the other state to avoid double taxation.