The Illinois commission tax rate is 4.95 percent, the same flat rate the state applies to every other form of earned income. There is no higher bracket that kicks in when a large commission check lands, and no separate schedule for supplemental pay. Whether commissions sit on top of a base salary or make up your entire paycheck, the math is identical.
Why the Rate Is Flat
Article IX, Section 3 of the Illinois Constitution requires that any tax on income be “at a non-graduated rate,” which means the legislature cannot build tiered brackets the way the federal government does. Voters rejected a proposed constitutional amendment in 2020 that would have allowed graduated rates, so the single-rate structure remains.
The current 4.95 percent rate took effect on July 1, 2017, and applies to the net income of individuals, trusts, and estates.1Illinois General Assembly. Illinois Code 35 ILCS 5/201 – Tax Imposed A $500 commission and a $50,000 commission are both taxed at 4.95 percent.
How Commissions Are Withheld From Your Paycheck
Under Illinois administrative rules, commissions count as supplemental wages, in the same category as bonuses and overtime.2Illinois General Assembly. Illinois Administrative Code 86 Part 100 Section 100.7050 – Computation of Amount Withheld That classification governs how your employer calculates withholding, not the rate itself. Federal rules let employers withhold a flat 22 percent on supplemental wages,3Internal Revenue Service. Publication 15 – Employer’s Tax Guide – Section: 7. Supplemental Wages but the Illinois portion is simply 4.95 percent applied to the gross commission, less a proportionate share of your withholding exemptions.
The state tax comes out of the check when the commission is paid, so you shouldn’t see a large surprise bill at filing time from the state portion alone. Federal income tax and, for W-2 employees, FICA are separate matters handled on the same paystub.
Adjusting Your Withholding When Commissions Fluctuate
Commission income tends to be lumpy, and the default withholding may leave you underpaid or overpaid at year end. Form IL-W-4 lets you change how much Illinois tax your employer withholds. You can file a new one at any time to increase withholding or reduce the number of allowances you claim. If your allowances decrease, you have to submit the updated form within 10 days.4Illinois Department of Revenue. Employee’s and Other Payee’s Illinois Withholding Allowance Certificate and Instructions
One trap catches new hires. If you never file a signed IL-W-4, your employer must withhold Illinois tax on your entire compensation with no exemptions applied.4Illinois Department of Revenue. Employee’s and Other Payee’s Illinois Withholding Allowance Certificate and Instructions For a commission-heavy job, that can mean a lot more tax taken out of each check than you actually owe.
If You Get a 1099 Instead of a W-2
Real estate agents, insurance brokers, and other independent contractors typically receive commissions on Form 1099-NEC rather than a W-2. The Illinois rate is still 4.95 percent.1Illinois General Assembly. Illinois Code 35 ILCS 5/201 – Tax Imposed You report net self-employment income on your federal return (usually Schedule C), and that figure carries over to your Illinois Form IL-1040.
The difference is that no one is withholding Illinois tax for you. You pay it yourself, generally through quarterly estimated payments. Self-employed commission earners also owe federal self-employment tax on top of state income tax, so the total burden is higher than a W-2 employee’s.
The Personal Exemption That Reduces Your Bill
Before the 4.95 percent rate is applied, you subtract a personal exemption from your Illinois base income. For tax year 2026, that exemption is $2,925 per person. Married joint filers each claim one, plus one for each dependent. Taxpayers who are 65 or older or legally blind add $1,000 for each qualifying condition.5Illinois Department of Revenue. What Is the Illinois Personal Exemption Allowance?
The exemption phases out completely for high earners. If your federal adjusted gross income exceeds $250,000 ($500,000 for married filing jointly), you lose it entirely and pay 4.95 percent on your full Illinois base income.5Illinois Department of Revenue. What Is the Illinois Personal Exemption Allowance?
Estimated Payments for Variable Commission Income
If your total Illinois tax liability exceeds withholding and credits by more than $1,000, you’re expected to make quarterly estimated payments.6Illinois Department of Revenue. What Is the Penalty for Not Making Estimated Tax Payments? This can apply to W-2 commission earners whose withholding falls short as well as to self-employed contractors.
For tax year 2026, the deadlines are April 15, 2026; June 15, 2026; September 15, 2026; and January 15, 2027. You can also pay the full estimated amount by the first deadline.7Illinois Department of Revenue. Estimated Income Tax Payments for Individuals
Illinois waives the underpayment penalty if you timely paid either 100 percent of the prior year’s tax liability or 90 percent of the current year’s. When commission income swings hard from year to year, the prior-year safe harbor is usually easier to hit. The penalty also disappears if your total liability for the year, after withholding and credits, is $1,000 or less.8Illinois Department of Revenue. 2025 Form IL-2210 Instructions A commission earner who has a big spike midyear should recalculate promptly rather than wait a quarter to catch up.
If You Live in Iowa, Kentucky, Michigan, or Wisconsin
Illinois has reciprocal tax agreements with those four states.9Illinois Department of Revenue. Filing Requirements If you live in one of them but earn commissions from an Illinois employer, you don’t owe Illinois income tax on that pay. You pay tax only in your home state.
To claim the exemption, file Form IL-W-5-NR with your employer.10Illinois Department of Revenue. Employee’s Statement of Nonresidence in Illinois After that, your employer stops withholding Illinois tax. If Illinois tax was already withheld before you filed the form, you’ll need to file an Illinois return to recover it, because you can’t take the withholding as a credit on your home state’s return.9Illinois Department of Revenue. Filing Requirements If you change residency, notify your employer within 10 days.
Penalties If You File or Pay Late
Illinois charges separate penalties for filing late and paying late, and they stack. The late-filing penalty is 2 percent of the tax due, capped at $250. If you still haven’t filed 30 days after the Department of Revenue sends a notice, an additional penalty of at least $250, or 2 percent of the tax if that’s greater, applies, up to $5,000.
Late payments follow two tiers: 2 percent if you pay within 30 days of the due date, 10 percent if you pay later than that. The same tiers apply to each quarterly estimated installment.6Illinois Department of Revenue. What Is the Penalty for Not Making Estimated Tax Payments?
The filing deadline for 2025 returns is April 15, 2026. Illinois grants an automatic six-month extension to file, but the extension covers paperwork only. Any tax owed is still due April 15, and you submit Form IL-505-I with the payment to avoid interest and penalties.11Illinois Department of Revenue. Due Date/Extension to File Income Tax Return (2025 IL-1040)