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

Yes, Illinois collects state income tax. The state tax rate is 4.95 percent on wages, salaries, and most other forms of income. This is a flat tax, meaning everyone pays the same percentage regardless of how much they earn. Illinois does not use a progressive tax system where higher earners pay higher rates.

The 4.95 percent rate applies to your federal taxable income after you subtract the standard deduction or itemize deductions. Illinois recognizes the federal deductions you claim on your federal return, so you do not calculate Illinois income differently from scratch.

Illinois also taxes capital gains, interest, and dividends at the same 4.95 percent rate. Retirement income — including distributions from 401(k)s, IRAs, and pensions — is taxed at this rate as well, though some retirement income may be excluded under specific conditions.

Key Takeaways

  • Illinois taxes income at a flat rate of 4.95 percent, applied to wages, investment income, and most retirement distributions.
  • You file Illinois income tax using Form IL-1040 if you lived in the state for any part of the tax year and earned income subject to Illinois tax.
  • Illinois recognizes federal deductions and exemptions, so your Illinois taxable income is usually based on your federal return.
  • Certain types of income — including Social Security benefits, some retirement distributions, and income from out-of-state sources — may be partially or fully excluded from Illinois taxation.
  • The Illinois Department of Revenue processes returns and handles disputes; you can file online, by mail, or through a tax preparer.

Who must file an Illinois income tax return

You must file an Illinois return if you lived in Illinois for any part of the tax year and your income exceeds the filing threshold. The threshold depends on your filing status and age. For the 2023 tax year, a single person under 65 with at least $2,275 in income must file; a married couple filing jointly with at least $4,550 must file. These thresholds change yearly and are higher for people 65 and older.

You must file even if you do not owe Illinois tax, if you had income tax withheld from your paychecks. Filing allows you to claim a refund of any overpayment. Non-residents who earned income in Illinois may also need to file, depending on the type and amount of income.

What income is taxed and what is not

Wages, salaries, bonuses, and self-employment income are all subject to the 4.95 percent tax. Interest from savings accounts and certificates of deposit, dividends from stocks, and capital gains from selling investments are taxed at the same rate.

Social Security benefits are not taxed by Illinois, even though they may be taxed federally. Distributions from may have access to retirement plans — 401(k)s, IRAs, and pensions — are taxable, but Illinois allows a pension exclusion for certain retirees. If you receive a pension or annuity from a public employee system (such as IMRF, SERS, or TRS), you may exclude up to $30,000 of that income from Illinois taxation, depending on your age and when you retired.

Income earned outside Illinois from non-resident sources is generally not taxed by Illinois. If you worked in another state or received income from a business located elsewhere, you typically do not owe Illinois tax on that amount, though you may owe tax to the other state.

How to file your Illinois income tax return

The Illinois Department of Revenue accepts returns filed online through their website, by mail, or through a tax preparer or accountant. The form you use is Form IL-1040 for residents, or Form IL-1040-NR for non-residents. You must include your federal return or a copy of it with your Illinois return if you file by mail.

The filing deadline is the same as the federal deadline — typically April 15 of the year following the tax year. If you cannot file by that date, you can request an extension, which gives you until October 15 to file without penalty, though any tax owed is still due by April 15.

If you use tax software or a preparer, they can file electronically on your behalf, which is faster and reduces errors. The Illinois Department of Revenue also offers free tax preparation services through the Volunteer Income Tax Assistance (VITA) program if your income is below a certain threshold.

Tax withholding and estimated payments

Your employer withholds Illinois income tax from your paycheck based on the W-4 form you complete. The amount withheld depends on your filing status, the number of dependents you claim, and any additional withholding you request. If you think too much or too little is being withheld, you can adjust your W-4 with your employer.

If you are self-employed or have income not subject to withholding — such as rental income or investment income — you may need to make estimated tax payments to Illinois four times per year. These payments are due in April, June, September, and January. You calculate them based on your expected annual income and file them using Form IL-1040-ES.

If you do not withhold enough or make estimated payments, you may owe a penalty when you file your return. Conversely, if too much is withheld, you will receive a refund.

Deductions and credits available to Illinois residents

Illinois allows you to use the same deductions you claim on your federal return — either the standard deduction or itemized deductions. You do not calculate Illinois deductions separately; the state recognizes what you deduct federally.

Illinois offers a few state-specific credits that can reduce your tax. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is calculated based on your federal EITC. The Property Tax Credit is available to renters and homeowners with low to moderate income. The Dependent Care Credit helps offset childcare expenses. These credits are claimed on your Illinois return and can result in a refund if they exceed your tax owed.

What happens if you do not pay or file

If you owe Illinois income tax and do not pay by the deadline, the state charges interest and penalties. Interest accrues at a rate set by the Illinois Department of Revenue and compounds daily. A failure-to-pay penalty is typically 0.5 percent of the unpaid tax per month, up to 25 percent total. A failure-to-file penalty is higher if you do not file at all.

If you do not file and the Illinois Department of Revenue believes you owe tax, they may file a return on your behalf based on information they have — such as W-2s from employers — and assess tax accordingly. You can dispute this by filing your own return and providing documentation of your actual income and deductions.

If you cannot pay what you owe, the Illinois Department of Revenue offers payment plans and may consider an offer in compromise if your financial hardship is severe. Contact the department directly to discuss options.

Frequently Asked Questions

Do I owe Illinois income tax if I moved out of state during the year?

You owe Illinois tax only on income earned while you were a resident. If you moved out of Illinois partway through the year, you file Form IL-1040 for the months you lived there and may file a non-resident return for the state you moved to. You will need to report your move date and provide documentation of when you established residency elsewhere.

Is military income taxed by Illinois?

Military pay is subject to Illinois income tax if you are an Illinois resident, even if you are stationed out of state. However, if you are a non-resident stationed in Illinois, you generally do not owe Illinois tax on your military income. The key is your state of legal residence, not where you are stationed.

What if I worked in another state but live in Illinois?

Income you earned in another state is generally taxed by that state, not Illinois. Illinois does not tax out-of-state income. However, you may owe tax to both states if you lived in Illinois and worked in a neighboring state that also taxes residents' income. Check the other state's rules and claim a credit on your Illinois return for taxes paid to the other state to avoid double taxation.

Can I get a refund if too much was withheld?

Yes. If your employer withheld more Illinois tax than you owe, you will receive a refund when you file your return. Refunds are typically issued within 30 to 60 days of filing if you file electronically, or longer if you file by mail. You can check the status of your refund on the Illinois Department of Revenue website.

What is the difference between Illinois tax and federal tax?

Federal tax is collected by the IRS and uses a progressive rate system where higher earners pay higher percentages. Illinois tax is collected by the Illinois Department of Revenue and uses a flat 4.95 percent rate for all income levels. You file separate returns for each, though Illinois recognizes your federal deductions.