Illinois state tax starts with a flat 4.95 percent income tax on every individual, no brackets and no graduated rates, applied to your Illinois base income after exemptions.1Illinois General Assembly. Illinois Code 35 ILCS 5/201 – Tax Imposed On top of income tax, residents also pay sales tax, a use tax on untaxed out-of-state purchases, and, for larger estates, a state estate tax. Here’s what each one costs and how to handle them.
The Income Tax Rate
The 4.95 percent rate has been in place since July 1, 2017, and applies the same way whether your taxable income is $30,000 or $3 million.1Illinois General Assembly. Illinois Code 35 ILCS 5/201 – Tax Imposed The Illinois Constitution requires a single non-graduated rate, so to find your tax before credits you multiply your Illinois net income by 0.0495.
If you own a pass-through business (an S-corporation, partnership, or sole proprietorship), your share of the income flows to your personal return and is taxed at the same 4.95 percent.
Who Has to File
If you had to file a federal return and lived in Illinois for any part of the year, you almost certainly need to file an Illinois return too. Residents report all income. Part-year residents report what they earned while living in Illinois plus any Illinois-source income earned after moving. Nonresidents who earned wages, collected rent, or sold property in the state also file.2Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 5/301 – General Rule
The dollar threshold ties to the personal exemption: if your Illinois base income is more than $2,925 for 2026, you need to file.3Illinois Department of Revenue. What is the Illinois Personal Exemption Allowance? If someone claims you as a dependent and your base income is $2,925 or less, the exemption covers it and you owe nothing. Over that amount, a dependent’s exemption drops to zero.
If You Live in Illinois but Work in Iowa, Kentucky, Michigan, or Wisconsin
Illinois has reciprocal agreements with those four states. An employer in a reciprocal state should not withhold that state’s income tax from your wages; you pay Illinois tax on the income instead. The reverse works too for residents of those states working in Illinois.4Legal Information Institute. Illinois Administrative Code tit. 86, Section 100.7090 – Reciprocal Agreement If an out-of-state employer withholds by mistake, you have to file a return with that state to get the money back; you cannot claim it as a credit on your Illinois return.
How Illinois Figures Your Taxable Income
Your federal adjusted gross income from your completed federal return is the starting point on Form IL-1040.5Illinois Department of Revenue. How is Illinois Base Income Figured? From there Illinois requires some additions and allows some subtractions.
The biggest subtraction for many filers is retirement income. If your federal return includes taxable Social Security, 401(k) distributions, IRA withdrawals, government pensions, or railroad retirement, you subtract those amounts on your Illinois return and pay no state tax on them.6Illinois Department of Revenue. Does Illinois Tax My Pension, Social Security, or Retirement Income? You also subtract any Illinois income tax refund that was included in your federal AGI, along with items reported on Schedule M such as military pay.7Illinois Department of Revenue. 2025 IL-1040 Instructions
The most common addition is interest from municipal bonds issued by other states. Iowa or California muni interest is federally exempt but has to be added back to your Illinois base income. Interest on Illinois state and local bonds stays exempt.5Illinois Department of Revenue. How is Illinois Base Income Figured?
Exemptions and Credits That Cut Your Bill
After calculating base income, you subtract the personal exemption allowance. For 2026, that’s $2,925 for yourself, $2,925 for a spouse on a joint return, and $2,925 for each dependent.3Illinois Department of Revenue. What is the Illinois Personal Exemption Allowance? Filers who are 65 or older or legally blind get an extra $1,000 per qualifying condition.8Illinois Department of Revenue. Step 4 – Exemptions
Several credits then reduce your tax dollar for dollar:
- Property tax credit worth 5 percent of the property taxes you paid on your Illinois principal residence. Pay $8,000 in property tax, get a $400 credit.9Illinois Department of Revenue. Pub-108, Illinois Property Tax Credit
- K-12 education expense credit covering 25 percent of qualified expenses (tuition, book fees, lab fees) above $250 per student, capped at $750 per family. Keep receipts.10Illinois Department of Revenue. Pub-112, Education Expense Credit General Rules and Requirements
- Illinois earned income tax credit, calculated as a percentage of your federal EITC. You have to qualify federally first.
- Illinois child tax credit, calculated as a percentage of your Illinois EITC and claimed on Schedule IL-E/EITC.11Illinois Department of Revenue. Illinois Child Tax Credit
The property tax credit is the easy one to miss. It doesn’t show up on your federal return, and Illinois property taxes are high enough that even 5 percent is real money.
Filing, Paying, and Extensions
You file your income tax on Form IL-1040. Electronic filing through MyTax Illinois is the fastest route and gives you a confirmation number.12Illinois Department of Revenue. File Form IL-1040, Individual Income Tax Return, on MyTax Illinois Paper returns go by mail but take much longer to process.
If you owe, you can pay through the online portal by bank account withdrawal. Credit card payments go through third-party processors that charge roughly 2.25 to 2.49 percent of the payment, with minimum fees of $2.50 to $3.75.13Illinois Department of Revenue. Pay by Credit Card Paper filers paying by check or money order include Form IL-1040-V as a payment voucher.
Refunds on electronically filed returns usually arrive in about four weeks. Paper returns take four to eight. Check status with the “Where’s My Refund?” tool on the Illinois Department of Revenue site.14Illinois Department of Revenue. Where’s My Refund?
Illinois grants an automatic six-month filing extension with no form required, pushing calendar-year filers to October 15.15Illinois Department of Revenue. Automatic Extension Payment for Individuals Filing Form IL-1040 The extension covers filing, not payment. If you owe, you still have to pay by April 15 to avoid late-payment penalties and interest. Use Form IL-505-I to send in an estimated payment while you finish the return.
Estimated Tax Payments if You Expect to Owe
If you expect to owe more than $1,000 after withholding and credits, Illinois requires quarterly estimated payments.16Illinois Department of Revenue. Estimated Income Tax Payments for Individuals This usually hits self-employed people, freelancers, landlords, and anyone with significant investment income.
For tax year 2026 the quarterly deadlines are April 15, 2026; June 15, 2026; September 15, 2026; and January 15, 2027. You can pay the full year’s estimate by the first deadline instead of splitting into four. Missing a quarterly deadline triggers a separate underpayment penalty on top of any tax owed.
Penalties if You File or Pay Late
Illinois charges filing penalties and payment penalties separately, and they can stack.
- Late filing: the lesser of $250 or 2 percent of the tax due, reduced by timely payments. If you still haven’t filed within 30 days of a nonfiling notice, an additional penalty applies — the greater of $250 or 2 percent of the total tax shown due, capped at $5,000.17Illinois Department of Revenue. Pub-103, Penalties and Interest for Illinois Taxes
- Late payment, 1 to 30 days late: 2 percent of the unpaid amount.
- Late payment, 31 or more days late: 10 percent of the unpaid amount.
- Tax found during an audit: 15 percent of any amount not paid before the audit begins, rising to 20 percent if not paid within 30 days of the audit’s conclusion.17Illinois Department of Revenue. Pub-103, Penalties and Interest for Illinois Taxes
Interest accrues on top of these penalties from the day after the original due date. The jump from 2 to 10 percent at day 31 is steep. If you’re going to be late, being less than 30 days late saves real money.
Sales Tax and Use Tax
The statewide base sales tax is 6.25 percent on general merchandise and 1 percent on qualifying groceries, prescription drugs, and medical appliances. Counties, municipalities, and special districts add their own percentages, so combined rates range from 6.25 percent to roughly 11 percent, with the highest rates concentrated in the Chicago area.
Use tax covers purchases from out-of-state sellers who didn’t charge Illinois sales tax, or charged less than the Illinois rate. This usually means online or catalog orders, or items bought while traveling. The rate matches sales tax: 6.25 percent on general merchandise, 1 percent on qualifying food, medicine, and medical appliances.18Illinois Department of Revenue. Use Tax for Individuals – Questions and Answers
If your total use tax for the year is $600 or less, report and pay it on your Form IL-1040 at tax time. Over $600, you file Form ST-44 and pay by the end of the month following each purchase.18Illinois Department of Revenue. Use Tax for Individuals – Questions and Answers Vehicles, watercraft, and aircraft use separate forms and don’t go on the income tax return.
Estate Tax
Illinois charges its own estate tax, separate from the federal estate tax. Estates of $4 million or less are exempt. Larger estates owe a graduated tax with effective rates ranging from under 1 percent to as high as 16 percent on the biggest estates.19Illinois Attorney General. Important Notice Regarding Illinois Estate Tax and Fact Sheet The calculation uses the pre-2001 federal state death tax credit table, which makes hand math tough.
The $4 million threshold sits well below the federal exemption, so some Illinois estates owe state tax while owing nothing federally. Families with substantial home equity and retirement accounts are the most likely to be caught by the gap. Legislation to raise the Illinois exemption has been introduced, but the $4 million figure remains in effect.