Illinois Income Tax Calculator 2026

How Illinois flat income tax works in 2026

Illinois's flat tax is deceptively simple: take your federal adjusted gross income, add back any federally tax-exempt interest from non-Illinois municipal bonds, subtract Illinois-specific subtractions (federally taxed Social Security, military pay, retirement income from qualified plans), subtract the personal exemption, and multiply by 4.95%. There is no graduated bracket and no marriage penalty in the rate itself.

Crucially, Illinois fully exempts qualified retirement income — 401(k) distributions, traditional IRA withdrawals, defined-benefit pensions, Social Security, and Railroad Retirement benefits are all subtracted from Illinois taxable income. This makes Illinois unusually attractive for retirees on paper, despite its property tax burden.

Illinois deductions, credits, and subtractions

• Personal exemption — ~$2,775 per filer and dependent for 2026, phased out at higher incomes above ~$250,000 single / $500,000 joint.
• Illinois Earned Income Credit — 20% of the federal EITC, refundable.
• K-12 Education Expense Credit — 25% of qualified K-12 expenses above $250, capped at $750 per family.
• Property Tax Credit — 5% of Illinois property tax paid on a primary residence, non-refundable, phased out at higher incomes.
• Retirement income subtraction — full exclusion of Social Security, pensions, 401(k), and IRA distributions for residents.
• Bright Start / Bright Directions 529 contributions — Illinois deduction up to $10,000 single / $20,000 joint per year.

Illinois property tax: the real burden

The statewide effective property tax rate is approximately 2.27% — second highest in the country behind New Jersey. In Cook County, the combined city-county-school-district levy on a $400,000 home routinely exceeds $9,000–$11,000 annually. Lake County and DuPage County school-district overlays push the all-in rate even higher in many suburban subdivisions.

The General Homestead Exemption reduces the equalized assessed value (EAV) by $10,000 in Cook County and $6,000 elsewhere. A Senior Citizens Homestead Exemption adds $8,000 in Cook (varies by county), and the Senior Assessment Freeze can lock EAV at the year of qualification for filers age 65+ under the income cap (~$65,000 household). Illinois also offers a Disabled Veterans Standard Homestead Exemption that can fully exempt the home from property tax based on service-connected disability rating.

Filing the General Homestead Exemption is required (typically done at closing) and the Senior Freeze must be renewed annually. Missing the renewal causes assessed value to reset to the current market value, often producing a 3–5x tax bill increase the following year.

Chicago-specific taxes

Chicago does not impose a separate city income tax, but combined sales tax in Chicago is 10.25% (6.25% state + 1.25% Cook County + 1.25% RTA + 1.5% city) — among the highest large-city rates in the country. Restaurant tax adds 0.5%–1.0% to prepared food, and the city imposes a 9% personal property lease tax that applies to many software-as-a-service subscriptions used by Chicago residents and businesses.

Common Illinois mistakes and planning tips

• Forgetting the retirement income subtraction. Many retirees overpay by including 401(k) distributions in Illinois taxable income.
• Missing the Senior Freeze renewal — losing the freeze typically triples the property tax bill the following year.
• Not filing the General Homestead Exemption after a closing. It is not automatic; confirm with your county assessor.
• Overlooking the Illinois 529 deduction — both Bright Start and Bright Directions plans qualify; out-of-state 529 contributions do not.
• Failing to protest the assessed value. Cook County reassesses on a 3-year cycle and informal appeals routinely reduce EAV by 5–15%.
• Underwithholding bonus and RSU income — Illinois supplemental withholding is 4.95% (same as the flat rate), which often is not enough when combined with the federal supplemental rate of 22% for top earners.

Capital gains in Illinois

Illinois treats long-term and short-term capital gains identically — both are taxed at the 4.95% flat rate. There is no preferential rate. For a high-income Chicago household, a long-term capital gain therefore faces 20% federal + 3.8% NIIT + 4.95% Illinois = 28.75% combined, materially higher than the same gain in Texas or Florida (23.8%) but well below California (37.1%).