Illinois Income Tax Guide 2026: 4.95% Flat Rate, Full Breakdown

Illinois keeps its income tax simple on the surface: one rate, 4.95%, applied to everyone. No brackets, no phaseouts for ordinary earners. But the simplicity can be deceptive — Illinois taxes your federal Adjusted Gross Income, not your federal taxable income. That means the federal standard deduction ($14,600 for a single filer in 2026) does not reduce your Illinois bill. The only subtraction is a $2,925 personal exemption per qualifying exemption claimed.

The result is that Illinois earners often face a higher effective state tax burden than the 4.95% headline implies relative to states that start from federal taxable income. Understanding this distinction is essential for anyone comparing Illinois to neighboring states, planning a relocation, or evaluating their total tax picture as a Chicago resident.

Illinois Income Tax Rate 2026: How the 4.95% Flat Rate Works

Illinois has taxed income at a flat rate since 1969, when the state constitution was amended to require uniformity in income taxation. The current rate of 4.95% has been in place since July 2017, when it increased from 3.75% to address the state's chronic budget deficit (it had temporarily been 5% from 2011 to 2015).

The mechanics are straightforward but important to understand correctly:

• Tax base: Your Illinois taxable income starts with your federal Adjusted Gross Income (AGI) — the figure on line 11 of your federal Form 1040. Illinois then allows a small number of additions and subtractions specific to Illinois, but crucially does not allow the federal standard deduction ($14,600 single / $29,200 MFJ in 2026) to reduce your Illinois base.
• Personal exemption: You may subtract $2,925 for each personal exemption you claim. For most single filers, this means one $2,925 subtraction. The exemption is eliminated entirely if your federal AGI exceeds $250,000 (single) or $500,000 (married filing jointly).
• Additional exemptions: An extra $1,000 per qualifying condition is available for age (65+) or blindness.
• The formula: Illinois Tax = (Federal AGI − $2,925 exemption) × 4.95%

The practical implication: a single filer earning $100,000 has a federal taxable income of $85,400 after the standard deduction, but an Illinois taxable income of $97,075 after only the $2,925 exemption. Illinois taxes the higher base at 4.95%, producing a tax of $4,805 — not $4,227 as a naive application of 4.95% to the federal taxable income figure would suggest.

Illinois does not allow itemized deductions beyond what is embedded in the AGI calculation itself (e.g., deductible IRA contributions, student loan interest, and health savings account deductions all reduce federal AGI and therefore also reduce Illinois taxable income, since Illinois starts from AGI).

How Much Illinois Income Tax Do You Actually Pay?

The table below shows calculated Illinois income tax for a single filer in 2026, using the $2,925 personal exemption. All figures assume the exemption is not phased out (income below $250,000 for single filers). At $250,000 and above, the exemption is fully eliminated.

A few worked examples to illustrate the calculation in full:

• $75,000 earner: AGI $75,000 − $2,925 exemption = $72,075 taxable. $72,075 × 4.95% = $3,568 Illinois tax. Effective rate: 4.76% of gross income. Federal income tax on this income (single, standard deduction) is approximately $8,817. Total federal + state income tax: ~$12,385 on $75,000 — combined effective rate approximately 16.5%.
• $100,000 earner: AGI $100,000 − $2,925 = $97,075. $97,075 × 4.95% = $4,805. Effective state rate: 4.81%. This compares to $4,447 for a Georgia earner (5.49% flat but from a $19,000 deduction base) — Georgia actually costs less in state income tax at $100K despite its higher headline rate.
• $250,000 earner: The personal exemption is fully phased out at this income level. Illinois tax = $250,000 × 4.95% = $12,375. Every dollar of income above $250,000 is taxed at the full 4.95%, and the effective rate equals the nominal rate.

Because Illinois taxes from federal AGI, earners who contribute to 401(k) plans, HSAs, or deductible IRAs do reduce their Illinois tax base through those deductions — those items reduce AGI before Illinois even begins its calculation.

Illinois vs Federal Approach: Why a Flat Tax Feels Progressive

Illinois's 4.95% flat rate is genuinely flat — the marginal rate never changes regardless of income. Yet as the effective rate table above shows, the effective rate increases from 4.66% at $50,000 to 4.95% at $250,000. This is because the $2,925 personal exemption is a fixed dollar amount: it shelters a larger percentage of income for lower earners than for higher earners. This is a standard feature of flat-tax-with-exemption systems and is not unique to Illinois.

The more important structural difference is how Illinois compares to states that tax from federal taxable income rather than federal AGI:

• States taxing from AGI (like Illinois): The federal standard deduction does not reduce your state tax base. A single filer earning $100,000 pays Illinois tax on $97,075 (after the $2,925 exemption).
• States taxing from federal taxable income: A state that simply applies its rate to the federal taxable income figure would give this same filer a taxable base of $85,400 ($100,000 minus the $14,600 federal standard deduction). At 4.95%, that would produce a state tax of only $4,227 — $578 less than Illinois collects.

In dollar terms, starting from AGI rather than taxable income costs a single filer earning $100,000 approximately $578 more per year in state income tax compared to an identical state with the same rate but a federal-taxable-income starting point. At $75,000, the additional cost is roughly $723. This is a meaningful distinction that is often missed in simple state tax comparisons.

Voters in Illinois rejected a constitutional amendment in November 2020 — the FAIR Tax amendment — that would have allowed the legislature to impose graduated income tax rates. The measure failed 55% to 45%, meaning Illinois is constitutionally required to maintain a flat rate. The flat rate is not merely legislative policy; changing it would require another constitutional amendment.

Social Security and Retirement Income in Illinois

Illinois is one of the most favorable states for retirement income taxation, and this is a significant and often underappreciated advantage of living in Illinois for retirees and public sector workers.

Social Security benefits: Fully exempt from Illinois income tax. Regardless of your total income level, no Social Security benefit is included in your Illinois taxable income. This contrasts with the federal treatment (up to 85% of Social Security is taxable federally above certain combined income thresholds) and with many states that partially or fully tax Social Security.

Public pension income: Retirement income from Illinois state and local government retirement systems — including the Teachers' Retirement System (TRS), the State Employees' Retirement System (SERS), the Illinois Municipal Retirement Fund (IMRF), and similar systems — is fully exempt from Illinois income tax. This is a constitutional protection, and it applies to the full pension benefit regardless of size.

Practical example: A retired Illinois teacher receiving a $70,000 annual TRS pension pays $0 in Illinois income tax on that pension. The same retiree in Wisconsin would pay Wisconsin income tax on most of that income at rates up to 7.65%.

Private retirement income: Distributions from 401(k) plans, traditional IRAs, and most private defined-benefit pensions are not exempt. These are included in federal AGI and therefore in Illinois taxable income. Only government-plan pensions receive the Illinois exemption.

Military retirement pay: Fully exempt from Illinois income tax, added as a specific Illinois subtraction.

The combination of Social Security exemption plus full public pension exemption makes Illinois significantly more attractive for retirees than its 4.95% rate implies. A public school teacher retiring with a $65,000 pension and $25,000 in Social Security pays zero Illinois income tax on all $90,000 of that income.

Chicago Taxes: What Illinois Earners Really Pay

Chicago residents do not pay a city income tax — Illinois has no local income taxes anywhere in the state. This is a genuine advantage compared to cities like New York City (up to 3.876% city income tax), Philadelphia (3.75%), or Columbus (2.5%). For a Chicago earner at $100,000, the absence of a city income tax is worth approximately $2,500–$3,500 per year compared to living in a comparable city with local income taxes.

However, Chicago compensates in other areas:

• Sales tax: Chicago has one of the highest combined sales tax rates in the US at approximately 10.25% (as of 2026). This includes 6.25% Illinois state sales tax, 1.75% Chicago city tax, 1.25% Cook County tax, and 1% Regional Transportation Authority (RTA) surcharge. On $30,000 of annual consumer spending, a Chicagoan pays roughly $3,075 in sales taxes — versus approximately $1,500 in a state with 5% combined sales tax.
• Property tax: Cook County (which includes Chicago) has an average effective property tax rate of approximately 1.73% — among the highest of any large US metro. On a $400,000 Chicago home, annual property taxes could run $6,920. This is dramatically higher than comparable markets: the average effective rate in Los Angeles County is approximately 0.72%, meaning an identical $400K home in LA would cost $2,880 in annual property taxes.
• Fuel and utility taxes: Chicago levies multiple additional taxes on gasoline, electricity, natural gas, and telecommunications. Illinois state gas tax was 47.1 cents per gallon as of 2026; Chicago adds additional city and county levies.

The net picture for a Chicago resident earning $100,000: state income tax of approximately $4,805 (no city income tax), but total tax burden including sales, property, and local levies can be substantial. Chicago's total cost structure is often a surprise to residents coming from lower-tax cities who focus only on the income tax headline.

Illinois vs Neighboring States: Indiana, Wisconsin, Missouri, Ohio

Illinois sits at the center of the Midwest, bordered by states with widely varying income tax approaches. The comparison is instructive for anyone considering relocation or cross-border employment.

Key observations from the comparison:

• Indiana at 3.05% is the most significant competitor. Indiana's flat rate is almost 2 full percentage points lower than Illinois. At $100,000, an Indiana resident could save approximately $1,900 per year in state income tax versus Illinois. Indiana also has lower property taxes and similar sales tax rates. The Indiana border counties near Chicago have seen notable residential migration from Illinois in recent decades.
• Wisconsin at up to 7.65% is more expensive for higher earners. A Wisconsin resident earning $200,000 pays significantly more than an Illinois equivalent despite Wisconsin's broader deduction base. For professional earners, Illinois is clearly preferable to Wisconsin on income tax alone.
• Missouri at 4.7% is slightly lower than Illinois. Missouri also allows a standard deduction that further reduces its effective rate, making Missouri modestly cheaper for most income levels.
• Ohio at 3.5% top rate is meaningfully cheaper than Illinois, particularly since Ohio's graduated structure means most income below $100,000 is taxed well below the top rate. Ohio also has relatively low property taxes outside of certain metro areas.

The broader picture: Illinois is not the cheapest Midwestern option. Indiana and Ohio offer materially lower income tax burdens. Wisconsin offers lower income taxes only at relatively low income levels. Missouri is slightly cheaper. The Chicago premium — access to the third-largest US metro, O'Hare international connectivity, world-class cultural institutions — is real, but it comes with a higher total tax burden than most regional alternatives.