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Illinois Retirement Income Tax

2026 rate and exemptions · reviewed September 5, 2026

Computes the Illinois income tax on a retirement income, showing what Illinois leaves alone and what it taxes. About

In plain words. Illinois has a flat income tax rate, but it does not tax Social Security, pensions, or withdrawals from IRAs and 401(k)s. It does tax wages, interest, dividends, capital gains, and rent. This tool takes both kinds of income and shows the Illinois bill, what the retirement exemption is worth, and the law behind each line.

Why it matters. People weighing a move, or a CPA answering the question every January, restate this from memory. The table here cites the statute for each line, and the calculator shows what it is worth to a particular household.

An example. A couple, both over 65, with $100,000 of Social Security and IRA withdrawals and $20,000 of interest and dividends owes Illinois about $600. If retirement income were taxed like wages, the bill would be about $5,500.

Where it stops. It assumes a full-year Illinois resident and no credits. An annuity you bought yourself, or deferred pay from a private employer, is taxed and belongs with the other income. Everything it leaves out.

$

Social Security, pensions, and IRA or 401(k) withdrawals, using the amounts that count as taxable on your federal return.

Wages, interest, dividends, capital gains, rents, and annuities you bought yourself. This is the income Illinois does tax.

Filing status
Ages
Illinois income tax for 2026
$601
Illinois taxes only your other income, at a flat rate. The bill comes to 0.5% of your $120,000 of total income, because all $100,000 of retirement income is subtracted first. If that income were taxed like wages, the bill would be $5,551, so the subtraction saves you $4,950 a year.
Illinois income tax on $120,000 of income in 2026, as the law stands and if retirement income were taxedTwo bars. $601 with the retirement income subtracted, as the law stands. $5,551 if the $100,000 of retirement income were taxed too.$0$2k$4k$6k$601As the law standstax on $20k$6kIf retirement income were taxedtax on $120k
Income Illinois starts from, after the subtraction
$20,000
Your federal adjusted gross income of $120,000, less the retirement income
Exemptions taken off before the tax
$7,850
$2,925 per person, plus $1,000 more for each person 65 or older
Income taxed at the flat 4.95% rate
$12,150
What is left after the exemptions

Illinois starts from your federal adjusted gross income. It subtracts retirement income from employer plans, IRAs, government and military pensions, and Social Security. It then allows $2,925 per person, and $1,000 more for each person 65 or older, and taxes the rest at a flat 4.95%. What stays taxable is the same income a working household would have, such as wages, interest, dividends, gains, and rents.

This follows the Illinois income tax rules for retirement income, using the 2026 rate and exemptions and the subtraction as Illinois Publication 120 describes it. It assumes you lived in Illinois all year, and it leaves out credits (property tax, K-12 education, earned income), other additions or subtractions, and federal tax. Illinois has no county or city income tax. An annuity you bought yourself or a private deferred compensation plan belongs in other income. Educational, not advice.

This is a simplified model, not your actual tax return or plan. It only knows what you type in, leaves out rules that may apply to you, and cannot weigh the other facts and trade-offs a real decision depends on. Before you act, talk with a professional who knows your whole situation.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.