Yes, Illinois has a state income tax that applies to most residents and workers

Illinois charges a flat state income tax on wages, investment income, and other earnings. Unlike many states that use a graduated tax system with different rates for different income levels, Illinois applies the same tax rate to all taxpayers. As of 2024, that rate is 4.95 percent on most income.

This means if you earn $50,000 a year in Illinois, you pay 4.95 percent of that to the state. If you earn $500,000, you still pay 4.95 percent. The rate has been set at this level since 2017, when it increased from 3.75 percent.

Illinois residents who work out of state may still owe Illinois income tax on their Illinois-source income, depending on where they live and work. If you work in another state but live in Illinois, you typically owe Illinois tax on that out-of-state income as well.

Key Takeaways

  • Illinois charges a flat 4.95 percent state income tax on wages, retirement income, investment gains, and most other income sources.
  • The tax rate is the same for all income levels — there are no higher brackets for higher earners.
  • Your employer usually withholds Illinois income tax from your paycheck, similar to federal withholding.
  • Retirees may owe Illinois income tax on some retirement income, though certain pensions and Social Security have special rules.
  • You file Illinois taxes using Form IL-1040 when you file your federal return, usually by April 15.

How Illinois income tax is withheld from your paycheck

When you start a job in Illinois, your employer uses a withholding form to calculate how much state income tax to remove from each paycheck. This works the same way federal income tax withholding does — the money goes directly to the state, not to you.

Your employer needs to know your filing status (single, married, head of household) and the number of dependents you claim. You provide this information on a state withholding form, often called an Illinois W-4 or similar document, which your HR or payroll department will give you.

The amount withheld is based on your gross pay and the withholding information you provide. If you have multiple jobs, side income, or significant investment income, your withholding may not be enough, and you could owe money when you file your return. You can adjust your withholding during the year if you expect this to happen.

What income is subject to Illinois state tax

Illinois taxes most types of income at the 4.95 percent rate. This includes wages from employment, self-employment income, interest and dividends, capital gains from selling investments, rental income, and income from businesses or partnerships.

However, some income sources are partially or fully exempt. Social Security benefits are not taxed by Illinois. Certain pension income is also exempt — specifically, pensions from the federal government, the military, and some state and local government systems. Private pensions and 401(k) withdrawals are taxable.

Illinois also exempts income from certain government bonds and some retirement account distributions. If you receive income from a pension, retirement account, or government source, check the Illinois Department of Revenue website or speak with a tax professional to confirm whether that specific income is taxable in Illinois.

Filing your Illinois state income tax return

You file Illinois state income tax using Form IL-1040, which you submit at the same time you file your federal return. The important date is typically April 15, the same as federal taxes. If you file for a federal extension, your Illinois return is also extended.

You can file on paper by mailing your return to the Illinois Department of Revenue, or you can file electronically through the state's online system or through tax software. Many tax software programs (TurboTax, H&R Block, TaxAct, and others) include Illinois state returns as part of their service.

When you file, you report your total income for the year and the amount of state tax already withheld from your paychecks. If you withheld too much, you receive a refund. If you withheld too little, you owe the difference. Self-employed people and those with significant non-wage income may need to make quarterly estimated tax payments throughout the year.

Tax credits and deductions available in Illinois

Illinois offers several tax credits that can reduce the amount of state income tax you owe. The Illinois Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is calculated as a percentage of the federal EITC. You claim it on your state return.

Illinois also offers credits for property taxes paid (the Property Tax Credit), child care expenses, and education-related costs in some cases. These credits vary in value and have income limits. Unlike federal deductions, Illinois does not allow you to claim a standard deduction on your state return — the state taxes your income at the flat rate with limited deductions.

To see which credits you may be may have access to to, review the instructions that come with Form IL-1040 or visit the Illinois Department of Revenue website. Tax software will typically walk you through questions about your situation and calculate any credits you may have access to for.

What happens if you move to or from Illinois

If you move to Illinois during the year, you owe Illinois income tax only on income earned after you became a resident. You file a part-year resident return on Form IL-1040-NR/PY, which separates your Illinois-source income from income earned in other states.

If you move out of Illinois, you owe Illinois tax only on income earned while you were still a resident. You also file a part-year return. Some states have reciprocal agreements with Illinois, meaning residents of those states who work in Illinois may not owe Illinois income tax — but this is rare and applies only to a few neighboring states in specific situations.

If you worked in Illinois but moved away, you still need to file an Illinois return for the year you worked there, reporting only the income you earned while living in the state. Keep records of when you moved and your address changes to support your filing.

Frequently Asked Questions

Do I have to pay Illinois income tax if I live in Illinois but work in another state?

You typically owe Illinois income tax on income you earn while living in Illinois, regardless of where you work. However, some states have reciprocal agreements with Illinois. If you live in Illinois and work in Indiana, for example, you may not owe Illinois tax on that out-of-state income. Check with the Illinois Department of Revenue or a tax professional about your specific situation.

Is Social Security taxed in Illinois?

No. Illinois does not tax Social Security benefits. If Social Security is your only income, you will not owe Illinois state income tax. However, if you have other income (wages, pensions, investment income), you still owe tax on that other income.

What if I did not have enough tax withheld and owe money?

You can pay the amount owed when you file your return. The Illinois Department of Revenue accepts payment by check, money order, or electronic payment. If you owe a large amount, you may be able to set up a payment plan. Contact the Department of Revenue if you cannot pay in full by the filing important date.

Can I claim dependents on my Illinois return to reduce my tax?

Illinois does not allow personal exemptions or dependent exemptions on your state return. The state taxes your income at the flat 4.95 percent rate regardless of dependents. However, you may be may have access to to the Illinois Earned Income Tax Credit if you have dependents and meet income limits.

Where do I send my Illinois tax return?

Mail paper returns to the Illinois Department of Revenue at the address listed in the Form IL-1040 instructions. Electronic filing through tax software or the state's online system is faster and reduces errors. The mailing address changes periodically, so check the current instructions before mailing.