Illinois State Income Tax Overview

Illinois imposes a flat income tax rate of 4.95% on all net income for individuals, regardless of income level or filing status. Unlike most states, Illinois does not use graduated brackets -- every dollar of net income above the personal exemption is taxed at the same 4.95% rate whether you earn $30,000 or $300,000. Illinois does not allow a standard deduction. Instead, the state provides a personal exemption of $2,425 per return for tax year 2025 (single filers and married filing separately), $4,850 for married couples filing jointly, and $2,425 per dependent. These exemptions are modest compared to the federal standard deduction, meaning Illinois residents pay state income tax on a larger share of their income than the federal exemption alone would suggest. One of the most significant features of Illinois tax law is its broad retirement income exemption. Social Security benefits, pension income from qualified government and private pension plans, distributions from 401(k) and 403(b) plans, traditional IRA withdrawals, and military retirement pay are all fully exempt from Illinois state income tax regardless of the amount. This makes Illinois considerably more favorable for retirees than the flat rate alone implies -- a retiree living entirely on Social Security and IRA distributions pays zero Illinois state income tax. To illustrate: a single Illinois resident earning $70,000 in wages has net income after the $2,425 personal exemption of $67,575. At 4.95%, state income tax owed is approximately $3,345 -- an effective rate of about 4.78% on gross income. Illinois has a combined state and local sales tax burden that ranks among the highest in the nation. The state rate is 6.25%, but Chicago and collar county municipalities commonly add local rates pushing the combined rate to 10% or above. Property taxes in Illinois are also among the highest nationally, particularly in the Chicago metropolitan area where effective rates often exceed 2% of assessed value annually.