Illinois has a flat state income tax of 4.95 percent on most income

Yes, Illinois charges state income tax. Unlike some states that have no income tax or graduated rates based on how much you earn, Illinois uses a flat tax rate. Everyone pays the same percentage: 4.95 percent of their taxable income, whether you make $30,000 or $300,000 a year.

This rate applies to wages, salaries, interest, dividends, and most other forms of income. The tax is withheld from your paycheck if you work for an employer, or you pay it when you file your annual return if you're self-employed or have income your employer doesn't withhold from.

Illinois also taxes retirement income differently depending on the source. Distributions from IRAs and 401(k)s are taxed at the full 4.95 percent rate. Social Security benefits are not taxed by the state. Pension income from public employee systems (like teachers or police) is exempt from state income tax, but private pensions are taxed.

Key Takeaways

  • Illinois charges 4.95 percent state income tax on wages, salaries, and most other income, with no variation based on how much you earn.
  • Your employer withholds state income tax from your paycheck automatically if you work in Illinois or for an Illinois employer.
  • Social Security benefits are not subject to Illinois state income tax, but IRA and 401(k) withdrawals are taxed at the full rate.
  • Public employee pensions are exempt from state income tax, but private pensions and annuities are taxed.
  • You file Illinois state taxes using Form IL-1040 when you submit your federal return, usually by April 15.

Who has to file an Illinois state tax return

You must file a state return if you lived in Illinois for any part of the tax year and had income above the filing threshold. For 2024, that threshold is $2,675 for single filers and $5,350 for married couples filing jointly. If you earned less than that, you generally don't have to file — but you may want to anyway if taxes were withheld from your pay, because you could receive a refund.

If you moved to Illinois during the year or moved away, you still file a return for the months you lived there. If you worked in Illinois but lived in another state, you may owe Illinois tax on the income you earned in the state, depending on your employer's location and your residency status.

Part-time workers, gig workers, and self-employed people must file if their net income from self-employment is $400 or more, or if their total income exceeds the threshold above. You'll report this on your federal return and then on the Illinois Form IL-1040.

How withholding works and what to do if too much is taken

When you start a job in Illinois, your employer uses a W-4 form to calculate how much state tax to withhold from each paycheck. The amount depends on your filing status, the number of dependents you claim, and other income you have. Most people have the correct amount withheld and owe nothing or receive a small refund when they file.

If you find that too much is being withheld — meaning you're getting a large refund every year — you can adjust your withholding by submitting a new W-4 to your employer's payroll department. You can also adjust if too little is being withheld and you owe money at tax time. The Illinois Department of Revenue website has a withholding calculator to help you figure out the right amount.

If you have multiple jobs, work part-time, or have a spouse who also works, withholding can be tricky. In those cases, you may need to claim fewer allowances or have additional tax withheld to avoid owing at the end of the year. Talk to your employer's payroll office or a tax preparer if you're unsure.

Deductions and credits available in Illinois

Illinois allows a standard deduction that reduces the income you actually pay tax on. For 2024, the standard deduction is $2,675 for single filers and $5,350 for married couples filing jointly. If you're 65 or older, or blind, you get an additional deduction. You can also itemize deductions if they exceed the standard amount, though most people use the standard deduction.

Illinois offers a few tax credits that directly reduce the tax you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is claimed on your federal return; Illinois automatically gives you a portion of the federal credit. The Property Tax Credit helps renters and homeowners with low incomes reduce their tax burden. You must file a return to claim either of these.

Unlike some states, Illinois does not allow a deduction for federal income tax paid. You also cannot deduct state and local taxes (SALT) on your Illinois return, though you may be able to on your federal return up to $10,000.

Filing your Illinois state return

You file your Illinois state return using Form IL-1040 at the same time you file your federal return, usually by April 15. You can file electronically through the Illinois Department of Revenue website, through tax software like TurboTax or H&R Block, or by mailing a paper form to the address listed on the form itself.

If you file electronically, you'll receive a confirmation number. If you mail a paper return, keep a copy for your records. The state typically processes returns within four to six weeks if you file electronically, and longer if you mail a paper form. If you're owed a refund, direct deposit is faster than a mailed check.

If you can't file by April 15, you can request an extension, but that only extends the filing deadline — not the payment deadline. If you owe tax, you should pay by April 15 to avoid penalties and interest, even if you file late.

What happens if you don't pay or file on time

If you owe Illinois state income tax and don't pay by the deadline, the state charges penalties and interest. The penalty for late payment is typically 0.5 percent per month of the unpaid tax, up to 25 percent total. Interest accrues daily at a rate set by the state each quarter, usually between 5 and 8 percent per year.

If you don't file a return when you're required to, the penalty is steeper: 5 percent per month of the unpaid tax, up to 25 percent. If the state determines you owe tax and you haven't filed, they may file a return on your behalf and assess the tax, penalties, and interest all at once.

If you're unable to pay what you owe, contact the Illinois Department of Revenue. They offer payment plans for amounts over $500, and you can request a plan online or by phone. Setting up a payment plan stops the failure-to-pay penalty from growing, though interest continues to accrue on the unpaid balance.

Frequently Asked Questions

Do I have to pay Illinois income tax if I work remotely for a company in another state?

If you live in Illinois and work remotely, you owe Illinois income tax on your wages, even if your employer is based elsewhere. Illinois taxes income earned by residents, regardless of where the employer is located. Your employer should withhold Illinois tax from your paycheck if they know you live in the state.

Is military income taxed in Illinois?

Military active duty pay is subject to Illinois state income tax. However, military retirement pay and Veterans Affairs disability benefits are not taxed by Illinois. If you receive a mix of income, only the active duty wages are subject to the state tax.

What if I moved out of Illinois during the year?

You file a part-year resident return for the months you lived in Illinois. You owe state tax only on income earned while you were a resident. When you move, notify your employer's payroll department so they stop withholding Illinois tax. You may be owed a refund for the months after you left.

Can I deduct student loan interest on my Illinois return?

No. Illinois does not allow a deduction for student loan interest on the state return. You can deduct up to $2,500 in student loan interest on your federal return if you meet income limits, but that federal deduction does not carry over to Illinois.

What if I owe both federal and state taxes — do I have to pay them at the same time?

Federal and state taxes are separate. You can pay them on different schedules if you need to, though both are due by April 15. If you file electronically, you can set up separate payment arrangements with each tax authority. Paying one does not affect your obligation to pay the other.