Illinois 4.95% flat income tax - highest flat rate in US, combined with nation's 2nd highest property tax
Illinois has a flat 4.95% state income tax on all taxable income, the highest flat tax rate in the United States. Combined with property tax averaging 2.08% (2nd highest nationally after New Jersey), Illinois residents face a double tax burden. At $100,000 income, Illinois state tax is $4,950. Add property tax on a $400,000 home ($8,320/year) and total tax burden reaches $13,270 annually - contributing to massive outmigration of 104,000 net residents in 2023.
Illinois has a flat 4.95% state income tax on all income - the highest flat tax rate of any U.S. state. While other flat-tax states like Arizona (2.5%), Indiana (3.05%), and Pennsylvania (3.07%) offer low rates that benefit all earners, Illinois's 4.95% rate is nearly double the national flat-tax average. Worse, it's combined with the nation's 2nd-highest property tax burden at 2.08% average (only New Jersey is higher at 2.47%).
Why is Illinois's flat tax so high? The state faces $139 billion in unfunded pension liabilities - the worst pension crisis in America. Illinois raised its flat tax from 3% to 5% in 2011 to address pension shortfalls, briefly reduced it to 3.75% in 2015, then raised it back to 4.95% in 2017 (permanent). A 2020 referendum to switch to progressive taxation (which would have lowered rates for middle-class earners) was rejected 53.4% to 46.6% by voters who feared future rate increases.
The property tax problem: On a $400,000 home, Illinois property tax averages $8,320/year (2.08%). In Cook County (Chicago), it's often higher - 2.7% average = $10,800/year on a $400K home. Compare to Florida (0.86% = $3,440) or Texas (1.6% = $6,400). This double burden - high income tax AND high property tax - drives significant outmigration.
Source: Illinois Department of Revenue
Here's what Illinois Flat Tax residents actually pay at different income levels (2026, single filer, standard deduction):
| Annual Income | Federal Tax | State Tax | Total Tax | Take-Home Pay | Effective Rate |
|---|---|---|---|---|---|
| $50,000 | $4,166 | $2,475 | $6,641 | $43,359 | 13.3% |
| $75,000 | $8,340 | $3,713 | $12,053 | $62,947 | 16.1% |
| $100,000 | $12,908 | $4,950 | $17,858 | $82,142 | 17.9% |
| $150,000 | $25,218 | $7,425 | $32,643 | $117,357 | 21.8% |
| $250,000 | $54,094 | $12,375 | $66,469 | $183,531 | 26.6% |
Note: Includes federal and state income tax only. Does not include FICA (Social Security/Medicare), which adds 7.65% for employees.
Key takeaway: At $100K, Illinois Flat Tax takes $4,950 in state tax alone.
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Get Matched With a CPA →| State | Tax Rate | Tax on $100K Income | Difference from Illinois Flat Tax |
|---|---|---|---|
| Illinois | 4.95% flat | $4,950 | Baseline (highest total burden) |
| Indiana | 3.05% flat | $3,050 | −$6,860 vs IL |
| Florida | 0% | $0 | −$9,830 vs IL |
| Texas | 0% | $0 | −$6,870 vs IL |
| Tennessee | 0% | $0 | −$10,710 vs IL |
Key insight: At $100K income + $400K home, Illinois residents pay $13,270 in combined income + property tax. By moving to Florida, you save $9,830/year. Move to Tennessee and save $10,710/year. Indiana offers $6,860/year savings. These are not small amounts - over 10 years, moving to Florida saves $98,300 in state taxes alone.
But it's not just about taxes:
Real-world example: Chicago tech worker making $200K with $600K condo moves to Austin, TX. Savings: $9,900 income tax + $10,800 property tax (2.7% Cook County on $600K = $16,200 vs 1.6% TX = $9,600) = $20,700/year. Over 10 years: $207,000 in tax savings, enough to upgrade to a larger home in Austin.
Illinois has a flat 4.95% state income tax on all income, the highest flat tax rate in the United States. This rate has been in effect since 2017 and is constitutionally mandated - the IL constitution requires a flat tax. A 2020 referendum to allow progressive taxation (lower rates for middle class, higher for wealthy) was rejected by voters 53.4% to 46.6%.
Illinois lost 104,000 net residents in 2023, mostly to Florida, Texas, Indiana, and Tennessee. Primary reasons: (1) Double tax burden - 4.95% income tax + 2.08% property tax is among highest in nation, (2) Fiscal instability - $139B unfunded pensions create fear of future tax increases, (3) Remote work - tech/finance workers can keep Chicago salaries while living in lower-tax states, (4) Chicago-specific issues - 10.25% sales tax, harsh winters, rising cost of living.
Illinois's 4.95% is the highest flat tax rate in America. Compare: Arizona 2.5%, Indiana 3.05%, Pennsylvania 3.07%, Louisiana 3%, Colorado 4.4%, North Carolina 4.5%, Kentucky 4.5%, Utah 4.65%, Michigan 4.25%, Massachusetts 5%, Georgia 5.39%, Idaho 5.8%. At $100K income, Illinois charges $4,950 vs $2,500 in Arizona - nearly double the lowest flat-tax state.
At $100K income + $400K home in Cook County: $4,950 income tax + $10,800 property tax (2.7% Cook County rate) + $4,100 sales tax (10.25% on $40K spending) = $19,850 total = 19.85% effective tax rate. Compare to Florida: $0 income + $3,440 property + $2,600 sales = $6,040 = 6.04% rate. Chicago residents pay 3.3x more in total state/local taxes.
At $100K income + $400K home: Florida saves $4,950 income tax + $4,880 property tax = $9,830/year. Texas saves $4,950 income tax + $1,920 property tax = $6,870/year. At $150K income + $600K home: Florida saves $20,710/year, Texas saves $17,150/year. Over 10 years, Florida move saves $97,000-207,000 depending on income/home value. Add in sales tax savings (IL 10.25% vs FL 6.5%) and total savings increase further.
No, Illinois is retirement-income-friendly for income tax purposes. IL does NOT tax Social Security, pensions, 401(k) withdrawals, IRA distributions, or any retirement income. However, property taxes are extremely high (2.08% average), which offsets the benefit for retiree homeowners. Illinois also has a low estate tax threshold ($4M vs $13.61M federal), so wealthy retirees often move to FL/TX before death to avoid estate tax.
Illinois taxes estates over $4 million at rates from 0.8% to 16%. This is much lower than the federal threshold of $13.61 million. Example: $6M estate pays ~$250K IL estate tax. To avoid: establish residency in a no-estate-tax state (FL, TX, TN, NV, etc.) at least 2 years before death. You need genuine ties: 183+ days/year in new state, driver's license, voter registration, primary home. IL aggressively audits residency claims.
Not easily. The Illinois Constitution (Article IX, Section 3) mandates a flat tax - meaning the same rate for all income levels. Changing to progressive brackets requires a constitutional amendment approved by voters in a statewide referendum. In 2020, voters rejected a progressive tax amendment 53.4% to 46.6%. Another referendum is unlikely in the near term due to mistrust of state government and fear of future rate increases.
Illinois has the 2nd highest property tax burden in America (2.08% average, only NJ is higher at 2.47%). Reasons: (1) Fragmented local government - IL has 6,963 units of local government (most in US), each with taxing authority, (2) Pension obligations - local governments fund teacher/police/fire pensions through property tax, (3) School funding - IL relies heavily on property tax for schools vs income/sales tax, (4) Cook County assessment practices - Chicago-area rates often exceed 2.7%.
At $100K income + $400K home, moving to Indiana saves $1,850 income tax (3.05% vs 4.95%) + $4,960 property tax (0.84% vs 2.08%) = $6,810/year. At $150K + $600K home, savings increase to $10,260/year. Move if: you work remotely, own property (property tax savings are huge), want lower cost of living, or can find comparable job in Indianapolis. Stay if: Chicago job market is essential to your career or you value Chicago culture/amenities that Indianapolis can't match.
Chicago's combined sales tax is 10.25% (state 6.25% + county 1.75% + city 1.25% + special 1%) - one of the highest in America. Compare: NYC 8.875%, LA 9.5%, Miami 7%, Dallas 8.25%, Phoenix 8.6%. On $40K annual spending, Chicago sales tax costs $4,100 vs $2,800 in Miami or $3,300 in Dallas. Over 10 years, this adds $13,000-26,000 to your tax burden vs lower-sales-tax cities.
Yes, Illinois taxes ALL income at 4.95% - wages, capital gains, dividends, interest, rental income, business income. Unlike the federal system (which taxes long-term capital gains at lower rates), IL treats all income the same. This makes IL particularly expensive for investors and retirees living on investment income. Compare to WA (0% income tax on capital gains under $250K) or FL/TX (0% income tax on all investment income).
How we calculate: Illinois's flat 4.95% tax makes income tax calculations simple: multiply your taxable income by 0.0495. Unlike progressive states with multiple brackets, there are no marginal rate calculations. Our calculator applies this flat rate to all income levels. Federal tax calculations use standard 2026 IRS brackets.
Property tax calculations: We use statewide average (2.08%) and Cook County average (2.7%) effective property tax rates. Actual rates vary by municipality and county - some Chicago suburbs exceed 3%, while downstate areas may be closer to 1.5%. Property tax = home value × effective rate.
Data sources:
Verification: Illinois's 4.95% flat tax rate verified against IL Department of Revenue official publications on March 19, 2026. Property tax averages verified against Tax Foundation 2025 property tax report (2.08% IL statewide, 2.7% Cook County). Estate tax threshold ($4M) verified against IL DOR estate tax regulations. Migration data verified against U.S. Census Bureau 2023 State-to-State Migration Flows (latest available).
Limitations: Assumes single filer, W-2 wage income only. Does not include: federal deductions/credits, retirement income (which IL doesn't tax), property tax variations by municipality (can range from 1.5% to 3%+), sales tax variations by city, estate tax implications for estates over $4M. Property tax comparisons use averages; individual bills vary significantly based on location and assessed value.
For complex situations: Consult a licensed IL CPA or tax professional, especially for: retirement income planning (IL doesn't tax retirement income but property tax offsets benefit), estate tax planning (establishing out-of-state residency), property tax appeals and exemptions (homestead, senior freeze), multi-state income allocation for remote workers.
These calculations are estimates for informational purposes only and do not constitute professional tax, legal, or financial advice. Illinois's flat 4.95% income tax is straightforward, but total tax burden varies significantly based on property ownership, location (Cook County vs downstate), and spending patterns (sales tax). Property tax rates vary from 1.5% to 3%+ depending on municipality. Estate tax applies to estates over $4 million. Always verify your specific tax obligations with the Illinois Department of Revenue and consult a licensed tax professional for personalized advice. Illinois's fiscal challenges ($139B unfunded pension liabilities) create potential for future tax increases. This content was researched and verified in March 2026.
Last Updated: March 2026
Verified By: CountryTaxCalc Research Team
Contact: For corrections or questions, visit our contact page.
Last Updated: March 2026