Illinois Income Tax Calculator 2025
Illinois State Tax Quick Facts (2025)
- Tax System: Flat Tax (everyone pays same rate)
- Tax Rate: 4.95% on all income
- Tax Brackets: None - simple flat percentage
- Retirement Income: NOT TAXED (Social Security, pensions, IRAs)
- Tax Year: 2025 (verified November 2025)
Illinois Has a Flat Income Tax: 4.95%
Illinois uses a flat tax system. Unlike progressive states (California, New York) where your rate increases with income, Illinois taxes everyone at the same 4.95% rate.
This makes calculating your Illinois tax super simple:
Illinois State Tax = Your Taxable Income × 4.95%
That's it. No brackets, no complicated calculations.
Who Benefits from Flat Tax?
- High earners: You pay 4.95% even on $500k+ income (vs 10-13% in CA/NY)
- Simple filers: Easy to calculate, less complex tax prep
Who Loses with Flat Tax?
- Low/middle earners: You pay 4.95% from dollar one (vs 0-4% starting rates in progressive states)
- Middle class: Often pay more in flat tax states than progressive states with similar top rates
Real Tax Examples
Illinois State Tax Calculation
Example 1: $40,000 Income
- $40,000 × 4.95% = $1,980 Illinois tax
- Effective rate: 4.95%
Example 2: $75,000 Income
- $75,000 × 4.95% = $3,712.50 Illinois tax
- Effective rate: 4.95%
Example 3: $150,000 Income
- $150,000 × 4.95% = $7,425 Illinois tax
- Effective rate: 4.95%
Notice: Same rate regardless of income. High earners benefit most from this system.
How Does Illinois Compare?
$75,000 Income - Illinois vs Other States
| State | Tax System | State Tax | Comparison |
|---|---|---|---|
| Illinois | Flat 4.95% | $3,713 | — |
| Indiana | Flat 3.0% | $2,250 | Save $1,463 |
| Iowa | Flat 3.8% | $2,850 | Save $863 |
| Wisconsin | Progressive | ~$3,600 | Save ~$113 |
| Missouri | Progressive | ~$3,350 | Save ~$363 |
| California | Progressive | ~$4,200 | IL saves $487 |
| Texas | No income tax | $0 | Save $3,713 |
| Florida | No income tax | $0 | Save $3,713 |
Key Insight: Illinois is middle-of-the-pack. Better than CA/NY, worse than neighboring Indiana/Iowa, much worse than no-tax states.
The Chicago Factor
Good news: Chicago does not have a city income tax (unlike NYC).
Bad news: Chicago has other high taxes and costs:
- Sales tax: 10.25% (one of the highest in the U.S.)
- Property taxes: Very high (2-3% of home value in Cook County)
- Streaming tax: 9% on Netflix, Spotify, etc. (yes, really)
- Gas tax: High state + local taxes
Living in Chicago vs Suburbs
Chicago City:
- State tax: 4.95%
- Sales tax: 10.25%
- Property tax: 2.5-3% of home value (Cook County)
- Example: $300k home = $7,500-$9,000/year property tax
Suburbs (e.g., DuPage County):
- State tax: 4.95% (same)
- Sales tax: 7.75-8.75% (lower)
- Property tax: 2-2.5% (still high, but better)
Indiana border towns (e.g., Munster, Schererville):
- State tax: 3.0% (vs 4.95%) = save ~$1,500/year on $75k income
- Sales tax: 7% (vs 10.25%)
- Property tax: 1-1.5% (much lower)
- Still commute to Chicago for work (45-60 min)
Many people choose Indiana to save on taxes while keeping Chicago jobs.
Illinois Tax Breaks (The Good News)
Illinois has some redeeming tax features:
1. Retirement Income is NOT TAXED
This is huge for retirees. Illinois does not tax:
- Social Security benefits
- Pensions (public and private)
- 401(k) and IRA withdrawals
- Any retirement income
This makes Illinois one of the most retiree-friendly states despite the 4.95% on working income.
2. Property Tax Credit
Illinois offers a property tax credit if you paid property taxes and your income is under $500,000 (single) or $1,000,000 (married). The credit is 5% of property taxes paid, up to $1,000 maximum.
Example: Pay $8,000 in property tax → get $400 credit on your state tax.
3. Education Expense Credit
25% credit for qualified K-12 education expenses, up to $750 per family.
Tax Filing in Illinois
Best Low-Cost Tax Software (2025)
-
Cash App Taxes - FREE for federal and Illinois state
Completely free, no hidden fees. Perfect for W-2 income. Flat tax makes Illinois returns super simple.
-
FreeTaxUSA - $0 federal, $14.99 Illinois state
Great value if you need slightly more features (rental income, small business).
-
TaxSlayer - $24.95 federal, $39.95 for both
Good for complex situations like side business, investments, multiple states.
Skip: TurboTax and H&R Block charge $89-$119 for the same thing.
Finding Affordable Tax Help in Illinois
- VITA (Volunteer Income Tax Assistance): FREE if you make under $64,000. Available statewide at libraries and community centers.
- AARP Tax-Aide: FREE for seniors. Very active in Illinois given the retiree-friendly tax laws.
- Local Enrolled Agent (EA): $150-$350 for straightforward return. EAs cost less than CPAs and specialize in tax.
Property Taxes: The Real Problem
While Illinois income tax is moderate (4.95%), property taxes are among the highest in the nation:
- Cook County (Chicago): 2.5-3% of home value
- Collar counties: 2-2.5%
- Downstate: 1.5-2%
Real Property Tax Examples
$300,000 home in Chicago: $7,500-$9,000/year
$300,000 home in Naperville: $6,000-$7,500/year
$300,000 home in Springfield: $4,500-$6,000/year
Compare to other states:
- Indiana: $3,000-$4,500 on same home
- Florida: $2,400-$3,000
- Texas: $5,000-$6,000 (high, but no income tax)
Many Illinois residents cite property taxes as the main reason for leaving, more than income tax.
Should You Leave Illinois for Tax Reasons?
✅ Consider Leaving Illinois If:
- You make $60k+ and can work fully remote
- You're moving to a lower-tax neighbor like Indiana (3.0%), Iowa (3.8%), or Missouri
- You own a home and pay high property taxes ($6,000+/year)
- You're tired of high overall costs (especially in Chicago/suburbs)
- You'd save $2,000-$4,000/year on income + property taxes combined
✅ Stay in Illinois If:
- You're retired (no tax on retirement income = Illinois is actually great!)
- You have a high-paying Chicago job that requires in-person work
- Your family/friends/life is all in Illinois
- You make under $50k (savings would be minimal)
- You rent and don't pay property taxes (income tax savings alone aren't huge)
⚠️ The Indiana Option
Many Chicago-area workers live in Northwest Indiana (Munster, Schererville, Crown Point, Valparaiso) to get:
- Lower income tax (3.0% vs 4.95%) = save ~$1,500/year on $75k
- Lower sales tax (7% vs 10.25%)
- Lower property taxes (1-1.5% vs 2.5-3%)
- Access to Chicago jobs (45-60 min commute)
Trade-off: Longer commute, fewer cultural amenities than Chicago.
Illinois vs Neighboring States (Full Picture)
| State | Income Tax | Sales Tax | Property Tax | Best For |
|---|---|---|---|---|
| Illinois | 4.95% flat | 6.25-10.25% | High (2-3%) | Retirees, high earners |
| Indiana | 3.0% flat | 7% | Low (1-1.5%) | Families, middle-class |
| Iowa | 3.8% flat (NEW 2025) | 6-7% | Moderate (1.5%) | Low cost of living seekers |
| Wisconsin | 3.5-7.65% progressive | 5-5.6% | Moderate (1.7%) | Balanced, good services |
| Missouri | 2.0-4.8% progressive | 4.23-10.1% | Low (1%) | St. Louis area |
Common Questions
Will Illinois raise the income tax?
Possibly. In 2020, Illinois tried to switch to a progressive tax (rejected by voters). The state has budget issues and may attempt tax increases in the future. However, any major change requires voter approval or legislation.
Can I deduct Illinois state tax on my federal return?
Maybe. You can deduct state income tax OR sales tax (not both) on your federal Schedule A if you itemize. However, the SALT (State And Local Tax) deduction is capped at $10,000 total. Many IL homeowners hit this cap with property taxes alone.
Do I pay Illinois tax if I work remotely for an Illinois company but live elsewhere?
No. You pay income tax to your resident state, not where your employer is located. If you live in Florida and work remotely for a Chicago company, you pay $0 state tax.
What if I move mid-year?
You'll file part-year returns for both states. Illinois will tax the income you earned while living there. Example: Move from IL to TX on July 1 → file IL return for January-June income, no TX return needed (no income tax).
The Bottom Line on Illinois Taxes
Income tax: Moderate at 4.95% flat. Better than CA/NY, worse than neighbors.
Property tax: Very high, especially in Chicago/suburbs. This is the real pain point.
Best for: Retirees (no tax on retirement income), high earners (4.95% is low for them), people with Chicago-specific jobs.
Consider leaving if: You're middle-class, can work remotely, and are tired of high overall costs. Moving to Indiana, Iowa, or a no-tax state saves $2,000-$5,000+/year.
Run your own numbers before deciding. Factor in income tax, property tax, sales tax, cost of living, and job opportunities.
Compare IL with other states: IL vs TX
State rankings: Lowest Tax States 2025 | Best States for Retirees | States with Flat Tax | Highest Tax States 2025