Tool | November 2017

State-by-State Guide to Taxes on Retirees

Illinois

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The Bottom Line
Map of Illinois

Mixed Tax Picture

The Prairie State generously excludes a wide variety of retirement income from taxation. But combined state and local sales taxes are steep. In some areas, the combined rate can be as high as 11% -- among the highest sales tax rates in the U.S. Property taxes are high in Illinois, too, but there are numerous homestead exemptions for seniors tied to age and income.

State Sales Tax

6.25% state levy. Localities can add as much as 4.75%, and the average combined rate is 8.70%, according to the Tax Foundation. Food, prescription drugs and non-prescription drugs are all taxed at 1% by the state.

Income Tax Range

There is a flat rate of 4.95% of federal adjusted gross income after modifications.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Illinois does not tax distributions from qualified employee benefit plans, including 401(k) plans; IRAs or self-employed retirement plans; traditional IRAs that have been converted to Roth IRAs; the redemption of U.S. retirement bonds; state and local government deferred compensation plans; government retirement or government disability plans, including military plans; Railroad Retirement income; retirement payments to retired partners; and lump-sum distributions of appreciated employer securities.

IRAs

Distributions are not taxed.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Distributions are not taxed.

Private Pensions

Payouts are not taxed.

Public Pensions

Illinois does not tax state and local government deferred compensation plans; government retirement or government disability plans, including military plans.

Property Taxes


The median property tax on Illinois' median home value of $174,800 is $4,058.

Tax breaks for seniors: Illinois residents who are at least 65 years old are eligble for a homestead exemption of up to $5,000. Seniors with household income of $65,000 or less can get their property's assessed value frozen. Additionally, they can defer property-tax payments.

Vehicle Taxes

Sales tax is 6.25% and up, depending on locality, on purchases of new cars. Private purchases of used cars are subject to a lower use tax that can vary by the age of the vehicle.

Inheritance and Estate Taxes

Illinois has an estate tax with a $4 million exemption. The maximum estate-tax rate is 16%. There is no inheritance tax.