How to Calculate Illinois Estate Tax: Threshold, Rates, and QTIP

To calculate Illinois estate tax, add the decedent’s gross estate to any adjusted taxable gifts, confirm the total exceeds the $4 million filing threshold, subtract allowable deductions to reach the taxable estate, and then apply Illinois’s graduated rate structure, which is the state death tax credit table frozen from federal law as it existed on December 31, 2001.¹ Because the tax paid to Illinois is itself deductible on the federal return, the two numbers depend on each other, so most filers run the final figure through the Attorney General’s online calculator rather than solving it by hand.²

Step 1: Test the $4 Million Threshold

Before running any numbers, check whether the estate even owes a return. Illinois requires a Form 700 filing when the gross value of the decedent’s assets plus adjusted taxable lifetime gifts exceeds $4 million. Estates below that line owe nothing and do not file.³

The $4 million works as a threshold, not a credit. Once an estate crosses it, tax applies to the full taxable estate, not just the portion above $4 million. That distinction matters when the estate sits close to the line, and the inclusion of lifetime gifts is easy to miss: an Illinois example shows an estate of $3,000,100 combined with $1,000,000 in adjusted taxable gifts producing $28 in Illinois estate tax.³

Step 2: Build the Gross Estate

Illinois defines the gross estate by reference to Internal Revenue Code Section 2031, which sweeps in virtually everything the decedent owned or had an interest in at death.⁴ The main categories:

Real estate located in Illinois, including the family home, rental properties, and vacant land.
Tangible personal property kept in the state, such as vehicles, jewelry, art, and furniture.
Intangible assets like bank accounts, brokerage accounts, stocks, bonds, and business interests, regardless of where the financial institution or certificates are located.
Life insurance proceeds from policies where the decedent held incidents of ownership, such as the right to change beneficiaries or borrow against the policy.
Retirement accounts, including IRAs and 401(k)s, whether payable to the estate or passing by beneficiary designation.

Every asset is valued at fair market value on the date of death. Real estate and high-value personal property like art or collectibles typically require professional appraisals. Financial accounts are valued using the closing balance or share price on the date of death.

Step 3: Subtract Deductions to Reach the Taxable Estate

Deductions on the Illinois return mirror those available on federal Form 706, which is why Illinois requires Form 706 as the supporting worksheet even when no federal return is otherwise required.³

The marital deduction is the largest single lever. Property passing outright to a surviving spouse, or to a qualifying trust for the spouse’s benefit, is fully deductible. This applies equally to partners in a civil union recognized under Illinois law.⁵ Charitable bequests to qualified nonprofit organizations reduce the taxable estate dollar for dollar.

Debts and administrative expenses also come off. Outstanding mortgages, credit card balances, and personal loans reduce the estate, as do funeral expenses, probate attorney fees, accounting charges, and court costs. What remains is the taxable estate, the figure that feeds the rate calculation.

Step 4: Apply the Frozen 2001 Rate Structure

Illinois does not use a single flat rate. The tax equals the maximum credit for state death taxes that was allowed under Internal Revenue Code Section 2011 as it existed on December 31, 2001, before Congress phased out that credit.¹ The state froze that credit table and turned it into its own tax.

The table applies graduated rates to the “adjusted taxable estate,” which is the taxable estate minus $60,000. Rates start at 0.8% on the lowest bracket and climb through multiple tiers to a maximum of 16% on adjusted taxable estates exceeding roughly $10 million. For estates in the $4 million to $6 million range, the effective rate typically works out to about 5% to 8% of the taxable estate.

The Interrelated Calculation

Here is where the arithmetic stops being linear. Illinois estate tax is deductible as an expense on the federal return, which lowers the federal taxable estate, which in turn changes the Illinois tax. The two figures chase each other, and no single pass through the numbers produces the right answer. The Attorney General’s office calls this the “interrelated calculation” and provides an online calculator built to handle it. The Form 700 instructions strongly encourage filers to use it.²

A Worked Number

The Attorney General’s fact sheet shows that a decedent with $5,000,000 in all-Illinois property owes $285,714 in Illinois estate tax.³ That is an effective rate of roughly 5.7%. An estate just over the threshold pays almost nothing; a $10 million estate can owe well over $1 million.

Step 5: Apportion if Property Sits Outside Illinois

When the decedent owned assets both inside and outside Illinois, the tax is not calculated only on the Illinois assets. Instead, compute a preliminary tax as though everything worldwide were located in Illinois, then multiply that figure by the ratio of Illinois assets to total assets.³ The statute codifies this apportionment method directly.¹

Say the preliminary tax on a $6 million total estate is $400,000, and $3 million of those assets are located in Illinois. The apportioned Illinois tax is $200,000 ($400,000 × 50%). Estates with less than 100% of assets in Illinois must complete the Form 700 Addendum to document the calculation.³ The same formula applies to non-residents who owned Illinois real estate or tangible personal property.

Adjustments for Married Couples

Two Illinois-specific rules can change the final number for a married decedent’s estate.

No Portability

Illinois does not allow portability of the unused estate tax exemption. At the federal level, any unused portion of the first spouse’s exemption transfers to the survivor automatically. Illinois rejects that concept. If the first spouse leaves everything outright to the survivor using the unlimited marital deduction, the couple has used only one $4 million exclusion, and the full exemption of the first spouse to die is gone.³ A credit shelter trust funded up to the $4 million exclusion at the first death is the standard tool for preserving both exclusions across two estates.

Illinois-Only QTIP Election

Illinois allows a state-only qualified terminable interest property election that is separate from any federal QTIP election, available for deaths occurring on or after September 8, 2009.⁴ The election lets the estate claim an Illinois marital deduction on property that would not qualify for a federal QTIP, which matters because the state exemption sits well below the federal exemption and creates an awkward middle range of assets. To make the election, the representative checks the QTIP box on Form 700, inserts the dollar amount, and provides the surviving spouse’s Social Security number on a timely filed return.⁵

What Happens After You Have the Number

Form 700 and full payment are both due within nine months of the date of death.² Form 700 goes to the Attorney General’s Revenue Litigation Bureau, while payment goes separately to the Illinois State Treasurer. Sending the check to the wrong office does not count as timely payment.

Interest on unpaid tax accrues at 10% per year from the nine-month due date until actual payment.² On a $285,000 bill, that is roughly $2,375 a month. The 10% rate is fixed by the form and does not track the federal underpayment rate. An extension of time to file, requested on Form 700-EXT within the original nine months, does not necessarily extend the time to pay, so interest continues to run on any unpaid balance even when an extension is approved.⁶

1
Illinois General Assembly. 35 ILCS 405/3 – Illinois Estate Tax
2
Illinois Attorney General. State of Illinois Estate and Generation-Skipping Transfer Tax Return Form 700
3
Illinois Attorney General. Estate Tax Instruction Fact Sheet
4
Illinois General Assembly. 35 ILCS 405/2 – Definitions
5
Illinois Attorney General. 2023 Important Notice Regarding Illinois Estate Tax and Fact Sheet
6
Illinois Attorney General. Request for Extension of Time to File a Return and/or Pay IL Estate Tax