Illinois charges a flat tax rate on most income you earn

Illinois has a flat income tax rate of 4.95%, meaning you pay the same percentage whether you earn $30,000 or $300,000 per year. This rate applies to wages, salaries, interest, dividends, and most other forms of income. The state does not use a graduated tax system where higher earners pay higher rates — everyone pays the same percentage.

Your employer typically withholds this tax from your paycheck automatically. If you are self-employed or have income without withholding, you may need to make estimated tax payments to the Illinois Department of Revenue throughout the year. The state also taxes certain retirement income, though some pensions and retirement accounts receive partial or full exemptions depending on your age and income source.

Key Takeaways

  • Illinois taxes income at a flat rate of 4.95%, applied equally to all income levels.
  • Most employees have state income tax withheld from paychecks by their employer.
  • Self-employed people and those with income sources that do not withhold taxes must make quarterly estimated payments.
  • Certain retirement income, including some pensions and Social Security, may be exempt or partially exempt from Illinois state income tax.
  • You file your state return with the Illinois Department of Revenue, usually at the same time you file your federal return.

Who has to file an Illinois state income tax return

You must file a state return if you lived in Illinois for any part of the tax year and your income exceeds the filing threshold. For 2024, the threshold is $2,575 for single filers and $5,150 for married couples filing jointly. These thresholds are adjusted annually for inflation. Even if your income is below the threshold, filing may benefit you if you had taxes withheld — you could receive a refund.

If you moved to or from Illinois during the year, you still file a full-year return with the state. Illinois taxes you on all income earned while you were a resident, regardless of where the income was earned. If you worked in another state while living in Illinois, you may be able to claim a credit for taxes paid to that other state to avoid double taxation.

What income is taxed and what is exempt

Illinois taxes wages, salaries, bonuses, tips, and self-employment income. It also taxes interest from savings accounts and certificates of deposit, dividends from stocks and mutual funds, rental income, and capital gains from selling property or investments. Gambling winnings are taxable, as are prizes and awards.

Several types of income are partially or fully exempt. Social Security benefits are not taxed by Illinois. Pension income is exempt if you are age 61 or older, or if you are receiving a pension from the federal government, military service, or certain public employee systems. Retirement account distributions from IRAs and 401(k)s are taxed as ordinary income, but some distributions may may have access to for exemptions. Interest from certain municipal bonds issued by Illinois municipalities is exempt. Gifts and inheritances are not taxed as income.

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

When you start a job in Illinois, your employer uses a withholding form to calculate how much state tax to remove from each paycheck. The amount depends on your filing status, the number of dependents you claim, and your expected annual income. If your circumstances change — you get married, have a child, take a second job, or your spouse starts working — your withholding may no longer be accurate.

If too much tax is withheld, you receive a refund when you file your return. If too little is withheld, you owe the difference. You can adjust your withholding by submitting a new form to your employer's payroll department. Self-employed people do not have withholding and instead make quarterly estimated tax payments directly to the Illinois Department of Revenue on April 15, June 15, September 15, and January 15.

Filing your return and key deadlines

Illinois state income tax returns are due on the same date as your federal return, which is typically April 15. If April 15 falls on a weekend or holiday, the deadline moves to the next business day. You can request an automatic extension to October 15 by filing Form IL-505-B, but an extension to file is not an extension to pay — you still owe any taxes due by April 15 or face penalties and interest.

You file your return with the Illinois Department of Revenue using Form IL-1040 (the basic return form) or Form IL-1040-SR if you are age 65 or older. You can file by mail, electronically through the state's online system, or through tax preparation software. The state offers free filing options for lower-income residents through the Volunteer Income Tax Assistance (VITA) program. If you file late without an extension, you face a penalty of 5% of the unpaid tax per month, up to 25%.

Estimated tax payments for self-employed and other income

If you are self-employed, a freelancer, or have significant income without withholding, you must make quarterly estimated tax payments. These payments are due April 15, June 15, September 15, and January 15. You calculate your expected annual income, subtract any credits, multiply by 4.95%, and divide by four to find each quarterly payment amount.

Underestimating your payments can result in penalties, even if you ultimately owe no tax or receive a refund. The Illinois Department of Revenue provides Form IL-1040-ES to help you calculate the correct amount. If your income is irregular or you are unsure of the amount, you can pay based on your previous year's tax liability to avoid penalties, then adjust when you file your return.

Tax credits and deductions available in Illinois

Illinois offers several tax credits that reduce the amount of tax you owe. The Earned Income Tax Credit (EITC) is available to low- and moderate-income working people and families. Illinois also offers a Property Tax Credit for renters and homeowners with lower incomes, and a Child and Dependent Care Credit for people who pay for childcare while working. Some residents may may have access to for a Home Improvement Credit if they made energy-efficient upgrades to their home.

Unlike the federal system, Illinois does not allow a standard deduction or itemized deductions on your state return. You report your income and then apply any credits you may have access to for. This means your state tax calculation is simpler than your federal return — you do not need to choose between itemizing and taking a standard deduction.

Frequently Asked Questions

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

If you live in Illinois and work in another state, you owe Illinois tax on that income. However, you can claim a credit on your Illinois return for taxes paid to the other state, which usually prevents you from paying tax twice on the same income. You file returns in both states, but the credit reduces your Illinois liability.

What happens if I do not file or pay my Illinois state taxes?

The Illinois Department of Revenue can assess penalties, interest, and liens against your property. Penalties start at 5% of unpaid tax per month. The state can also intercept your federal tax refund and apply it to your Illinois debt. If you cannot pay in full, you can request a payment plan or an offer in compromise.

Is Illinois income tax deductible on my federal return?

Yes, you can deduct state income taxes paid on your federal return, but only if you itemize deductions on your federal return rather than taking the standard deduction. The deduction is capped at $10,000 per year for all state and local taxes combined (including property tax and sales tax).

Can I get a refund if I overpaid my state taxes?

Yes. If your withholding or estimated payments exceed your actual tax liability, you receive a refund. The Illinois Department of Revenue typically issues refunds within four to six weeks of processing your return. You can check the status of your refund on the state's website using your Social Security number and return amount.

What if I moved out of Illinois during the year?

You file a part-year resident return and pay Illinois tax only on income earned while you lived in the state. You also file a return in your new state for income earned there. Some states have reciprocal agreements with Illinois that may affect your tax liability, so check with both states' revenue departments.