Is There an Inheritance Tax in Illinois? Estate Tax and $4M Threshold

There is no inheritance tax in Illinois. The state repealed its inheritance tax in 1982 and now collects only an estate tax, which applies when a deceased person’s estate is worth more than $4 million.¹ That tax is paid by the estate itself, out of estate funds, before anything reaches the heirs. If you are inheriting from someone who died in Illinois, you do not file a return with the state and you do not owe Illinois tax based on what you receive.

Why the Distinction Matters

An inheritance tax and an estate tax are not the same thing, even though people often use the phrases interchangeably. An inheritance tax is charged to the person receiving assets, and the amount can vary depending on the relationship between the deceased and the beneficiary. An estate tax is charged to the estate as a whole, based on its total value, and is settled by the executor or administrator before distributions are made.

Six other states still impose inheritance taxes on beneficiaries. Illinois is not one of them. So the practical answer for most heirs is simple: nothing is owed to Illinois on the inheritance itself. Whether the estate owed tax before you received your share is a separate question, and one the executor handles.

The $4 Million Estate Tax Threshold

An Illinois estate worth $4 million or less owes no estate tax. Once the value crosses $4 million, the tax applies to the entire estate, not just the portion above the line. The Illinois Attorney General’s office describes the $4 million figure as “a taxable threshold and not a credit against tax.”² Estate planners call this the Illinois “cliff tax.”

The cliff has real teeth. An estate valued at exactly $4 million pays zero. An estate valued at $4,000,100 owes about $28. But the graduated rates climb quickly from 0.8% up to 16%, applied through what the state calls an “interrelated calculation.” A $5 million estate owes roughly $285,714. A $6 million estate owes more. For a family sitting near the threshold, even modest planning to bring the value under $4 million can eliminate the tax entirely.

What Counts Toward the Threshold

The gross estate is broad. It includes real estate, bank accounts, brokerage and retirement accounts, life insurance proceeds if the deceased owned the policy, business interests, vehicles, and personal property. Assets held in a revocable living trust are included because the deceased kept control of them during life.³ The starting figure is the gross value, before subtracting debts, mortgages, or liens.

Lifetime gifts get pulled in too. Illinois adds “adjusted taxable gifts,” meaning taxable gifts the deceased reported on federal gift tax returns during life, to the estate value for the threshold test. In one of the Attorney General’s own examples, an estate with $3,000,100 in assets at death plus $1,000,000 in adjusted taxable gifts totals $4,000,100, crosses the line, and owes tax.² Small annual gifts within the federal exclusion ($19,000 per recipient for 2026) don’t count, because they are not taxable gifts for federal purposes. Larger transfers that required a federal gift tax return do. This keeps someone from giving assets away right before death to sidestep the tax.

Deductions That Lower the Taxable Estate

Several deductions can pull an estate below the $4 million line or at least shrink the tax bill.

Property passing to a surviving spouse (or a civil union partner recognized under Illinois law), including property qualifying for a QTIP election, can be deducted in full. The marital deduction has no cap.²
Bequests to qualified charitable organizations, whether outright or through a charitable trust, reduce the taxable estate.
Outstanding debts owed by the deceased, funeral costs, and administrative expenses such as attorney’s fees and executor compensation are deductible.

The marital deduction is the strongest tool, but it only delays the question. When the surviving spouse later dies, that spouse’s estate faces its own $4 million threshold.

No Portability for Married Couples in Illinois

Under federal estate tax rules, a spouse who dies without using their full exemption can pass the unused portion to the survivor. Illinois does not allow this. The Attorney General’s office states that “the portability and carry-over of the unused federal exemption to the surviving spouse is inapplicable to the computation and assessment of the Illinois Estate Tax.”²

Each spouse gets only their own $4 million threshold. A couple with $8 million in combined assets cannot rely on the first spouse’s unused portion flowing to the survivor. Without planning, they could end up owing Illinois estate tax even though their combined wealth is well under the federal exemption. Tools such as credit shelter trusts (also called bypass or B trusts) address this. By funding a trust at the first death with up to $4 million, a couple can shelter roughly $8 million across both estates.

Non-Residents Who Own Property in Illinois

Living outside Illinois does not automatically keep an estate out of Illinois tax. Non-residents who owned real estate or tangible personal property physically located in Illinois may need to file Form 700 on those assets. That includes homes, farmland, commercial property, boats, vehicles, and other tangible items kept in the state.²

For a non-resident estate, the tax is figured as if all assets were in Illinois, then multiplied by the ratio of Illinois assets to total assets. A non-resident with a $5 million estate and half the assets in Illinois would owe roughly half of what an Illinois resident with the same total would owe. Intangible assets like stocks and bank accounts held by a non-resident are generally not subject to Illinois estate tax.

Filing, Payment, and Deadlines

An estate with a gross value over $4 million (including adjusted taxable gifts) must file Illinois Form 700 with the Attorney General’s Office, together with a copy of Federal Form 706 and all schedules, appraisals, wills, trusts, and other supporting documents.³ The return is due nine months after the date of death, the same deadline as the federal return.⁴ Payment goes to a different office: the Illinois State Treasurer, by check, e-check, or ACH transfer. Cash is not accepted.⁵

An estate that needs more time can file Form 700-EXT within the original nine-month window. An extension to file is not an extension to pay. To delay payment, the estate representative must submit a written explanation of why paying on time is impossible or impractical.⁶ Even when a payment extension is granted, statutory interest keeps running from the original due date until the balance is paid.

Late payment also triggers penalties on top of the interest. A payment 1 to 30 days late carries a 2% penalty; more than 30 days late, 10%. If the amount remains unpaid through an audit, the penalty can rise to 15% or 20%. On an estate that owes several hundred thousand dollars, a few months of delay can add tens of thousands to the final bill.

How the Federal Estate Tax Fits In

The federal estate tax runs on its own, much higher exemption. For 2026, the federal basic exclusion amount is $15,000,000 per individual.⁷ The amount was made permanent by the One, Big, Beautiful Bill Act and adjusts for inflation going forward.⁸ A married couple can effectively shelter $30 million at the federal level through portability.

The gap creates a middle band of estates that owe Illinois but not the IRS. A $10 million estate, for example, owes nothing to the federal government but faces a substantial Illinois bill. Only estates above $15 million generally face both taxes. When both apply, the federal code allows a deduction for state death taxes actually paid, including the Illinois estate tax,⁹ which reduces the federal taxable estate and softens the combined burden.

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Illinois Attorney General. Estate Taxes
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Illinois Attorney General. Important Notice Regarding Illinois Estate Tax and Fact Sheet
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Illinois Attorney General. Form 700 – Illinois Estate and Generation-Skipping Transfer Tax Return
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Illinois General Assembly. Illinois Compiled Statutes 35 ILCS 405 – Illinois Estate and Generation-Skipping Transfer Tax Act
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Illinois State Treasurer. Estate Tax
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Illinois Attorney General’s Office. Form 700-EXT – Request for Extension of Time to File a Return and/or Pay Illinois Estate Tax and Generation-Skipping Transfer Taxes
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Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
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Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax
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Office of the Law Revision Counsel. 26 U.S.C. 2058 – State Death Taxes