The Illinois individual income tax is a flat 4.95% levied on your Illinois net income, which starts with your federal adjusted gross income, gets modified by state-specific additions and subtractions, and is then reduced by a personal exemption before the rate applies. Returns are filed on Form IL-1040 by April 15, and the state offers credits for property taxes, K–12 education expenses, and low- to moderate-income earners that can reduce what you owe.
How the 4.95% Rate Works
Illinois does not use graduated brackets. Every dollar of net income is taxed at 4.95%.1Illinois Department of Revenue. Income Tax Rates Net income means your Illinois base income minus personal exemptions, and the rate has applied since July 1, 2017.2Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/201 – Tax Imposed
The arithmetic is straightforward. If your Illinois base income is $80,000 and you claim one exemption of $2,925, your net income is $77,075 and your tax is $3,815.21. The complicated part is arriving at base income in the first place.
Who Has to File
A full-year Illinois resident must file Form IL-1040 if they were required to file a federal return, or if their Illinois base income is greater than the $2,925 personal exemption amount.3Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/502 – Returns and Notices If you’re claimed as a dependent on someone else’s return, you don’t have to file unless your Illinois base income exceeds $2,925.
Part-year residents file for the portion of the year they lived in Illinois. Non-residents file when they receive income from Illinois sources, such as wages from an Illinois employer, rent from Illinois property, or Illinois business income.3Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/502 – Returns and Notices
Building Your Illinois Base Income
The calculation begins with federal adjusted gross income from your Form 1040, then adjusts in both directions.4Internal Revenue Service. Definition of Adjusted Gross Income
What You Add Back
The most common addition is interest from out-of-state municipal bonds. It’s exempt federally but taxable in Illinois, so all federally tax-exempt interest and dividend income has to be added back on your Illinois return.5Illinois Department of Revenue. Publication 101 – Income Exempt From Tax Other additions include earnings from out-of-state 529 plans if you previously deducted the contributions, and recapture of certain Illinois depreciation adjustments. These are reported on Schedule M.
What You Subtract
Illinois is generous with subtractions. Social Security benefits, 401(k) distributions, IRA withdrawals, and other qualifying retirement income are subtracted from base income, so Illinois doesn’t tax them.6Illinois Department of Revenue. Publication 120 – Retirement Income Interest from U.S. Treasury securities and active-duty military pay are also subtracted.
The common subtractions appear on Form IL-1040 Lines 5 through 7. Schedule M handles the less common ones, including contributions to Illinois 529 college savings plans, deductible up to $10,000 (or $20,000 on a joint return).7Illinois Department of Revenue. IL-1040 Schedule M Instructions
The Personal Exemption for 2026
Each taxpayer and dependent gets a $2,925 personal exemption for tax year 2026, deducted directly from income before the rate is applied.8Illinois Department of Revenue. What Is the Illinois Personal Exemption Allowance? Taxpayers 65 or older get an extra $1,000, and the same applies to a spouse on a joint return.
The exemption vanishes entirely for high earners. If your adjusted gross income is over $250,000 (or $500,000 filing jointly), you lose it. There is no gradual phase-out; you’re either eligible or you aren’t.9FindLaw. Illinois Code 35 ILCS 5/204 – Standard Exemption
Credits That Reduce What You Owe
Credits are worth more than exemptions because they cut the tax itself, not just the income the tax applies to. Most of them go on Schedule ICR.10Illinois Department of Revenue. IL-1040 Schedule ICR Instructions
- Property Tax Credit: 5% of the property taxes paid on your primary Illinois residence. It’s non-refundable, so it can zero out your tax but won’t produce a refund on its own.11Illinois Department of Revenue. Illinois Property Tax Credit
- K–12 Education Expense Credit: 25% of qualifying tuition, book, and lab fee expenses over $250 per student, capped at $750 total no matter how many students. Not available if AGI is over $500,000 joint or $250,000 for other filers.12Illinois Department of Revenue. Publication 112 – Education Expense Credit General Rules
- Illinois Earned Income Tax Credit: 20% of your federal EITC. Refundable, so it can pay out even if you owe no state tax.13Illinois Department of Revenue. Illinois Earned Income Tax Credit – Maximum Credit Amount
- Illinois Child Tax Credit: 40% of your Illinois EITC amount, also refundable. You have to qualify for the Illinois EITC to get it.
- Volunteer Emergency Worker Credit: Up to $500 for qualifying volunteer firefighters and emergency agency members who served at least nine months and received no more than $5,000 in compensation. Limited to the first 10,000 approved applicants each year.14Illinois Department of Revenue. Volunteer Emergency Worker Credit
If You Cross a State Line to Work
Illinois has reciprocal agreements with Iowa, Kentucky, Michigan, and Wisconsin. Live in one of those four and work in Illinois, and you owe income tax only to your home state; the same reversed for Illinois residents commuting to those states.
To use the agreement, give Form IL-W-5-NR to your Illinois employer so they stop withholding Illinois tax. This is most relevant around Chicago, the Quad Cities, and metro St. Louis. Without the form on file, Illinois tax gets withheld by default, and you’ll have to file an Illinois return to recover it.
Filing the Return
MyTax Illinois is the state’s free electronic filing portal and handles most straightforward returns: W-2 wages, standard retirement subtractions, common credits. You need a prior-year Illinois return already on file to use it.15Illinois Department of Revenue. File Form IL-1040, Individual Income Tax Return, on MyTax Illinois For returns the portal can’t process, such as those with pass-through entity income or unusual Schedule M items, commercial tax software that supports Illinois e-filing works, or you can mail a paper return.
You’ll need your finished federal Form 1040, all W-2s and 1099s, and records for any property tax or education expense credits you’re claiming. Because the state return pulls heavily from the federal one, an error on the federal side carries into your Illinois filing.
The deadline is April 15, 2026. Illinois grants an automatic six-month filing extension with no form to submit, but that doesn’t extend the time to pay.16Illinois Department of Revenue. Due Date/Extension to File Income Tax Return If you owe and don’t pay by April 15, penalties and interest start running even with a valid extension. Use Form IL-505-I to send an estimated payment by the deadline if you need more time to finish the return.
Estimated Payments During the Year
If you expect to owe more than $1,000 in Illinois tax after subtracting withholding and credits, you’re required to make quarterly estimated payments. This usually affects freelancers, landlords, retirees with non-withheld income, and anyone with sizable investment earnings.17Illinois Department of Revenue. Publication 105 – Estimated Payments Requirements
Individual due dates are April 15, June 15, September 15, and January 15 of the following year. You avoid the underpayment penalty by paying at least 90% of the current-year tax or 100% of the prior-year tax in four equal installments. The penalty is 2% if a late payment reaches the state within 30 days of the due date, and 10% after that.
Penalties and Interest for Missing the Deadline
The initial late-filing penalty is 2% of the unpaid tax, capped at $250. If you still haven’t filed 30 days after the department mails a nonfiling notice, a second penalty applies: the greater of $250 or 2% of the total tax due, up to $5,000.18Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 735 – Uniform Penalty and Interest Act That second penalty isn’t reduced by payments you’ve already made, so it can dwarf the first.
If you file on time but pay late, the penalty is 2% of the unpaid tax when payment is 1 to 30 days late and 10% when 31 or more days late.19Illinois Department of Revenue. Publication 103 – Penalties and Interest for Illinois Taxes Unpaid tax discovered in an audit is penalized at 15%, rising to 20% if you don’t pay within 30 days of the audit closing.
Interest accrues daily on any unpaid balance at the federal underpayment rate under Internal Revenue Code Section 6621, adjusted every January 1 and July 1. Interest and penalties compound independently, so a balance left alone for months grows faster than most people expect.
If You Can’t Pay in Full
You can request an installment plan through MyTax Illinois or by mailing Form CPP-1.20Illinois Department of Revenue. Installment Payment Plan Request Forms If your balance is over $10,000 including penalties and interest, you’ll also need to submit financial disclosure on Form EG-13-I. Interest and penalties keep accruing during the plan, so paying as much as you can upfront reduces the total.