Illinois has a flat 4.95% state income tax on all income - higher than most other flat-tax states. While other flat-tax states like Arizona (2.5%), Indiana (2.95%), and Pennsylvania (3.07%) offer low rates that benefit all earners, Illinois's 4.95% rate is higher than most of them. Worse, it's combined with the nation's highest property tax burden, tied with New Jersey, at 1.88% average.
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 53.3% to 46.7% by voters who feared future rate increases.
The property tax problem: On a $400,000 home, Illinois property tax averages $7,520/year (1.88%). In Cook County (Chicago), it's often higher - 2.7% average = $10,800/year on a $400K home. Compare to Florida (0.78% = $3,120) or Texas (1.40% = $5,600). 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 | $3,820 | $2,330 | $6,150 | $43,850 | 12.3% |
| $75,000 | $7,670 | $3,568 | $11,238 | $63,762 | 15.0% |
| $100,000 | $13,170 | $4,805 | $17,975 | $82,025 | 18.0% |
| $150,000 | $24,734 | $7,280 | $32,014 | $117,986 | 21.3% |
| $250,000 | $51,304 | $12,230 | $63,534 | $186,466 | 25.4% |
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 $4,805 in state tax alone.
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| State | Tax Rate | Tax on $100K Income | Difference from Illinois Flat Tax |
|---|---|---|---|
| Illinois | 4.95% flat | $4,805 | Baseline (highest total burden) |
| Indiana | 2.95% flat | $2,921 | −$6,364 vs IL |
| Florida | 0% | $0 | −$9,205 vs IL |
| Texas | 0% | $0 | −$6,725 vs IL |
| Tennessee | 0% | $0 | −$10,245 vs IL |
Key insight: At $100K income + $400K home, Illinois residents pay $12,325 in combined income + property tax. By moving to Florida, you save $9,205/year. Move to Tennessee and save $10,245/year. Indiana offers $6,364/year savings. These are not small amounts - over 10 years, moving to Florida saves $92,050 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: $9,755 income tax + $7,800 property tax (2.7% Cook County on $600K = $16,200 vs 1.40% TX = $8,400) = $17,555/year. Over 10 years: $175,550 in tax savings, enough to upgrade to a larger home in Austin.
Illinois has a flat 4.95% state income tax on all income, one of the higher flat tax rates 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 53.3% to 46.7%.
Illinois lost about 84,000 net residents to domestic migration in 2023 (Census), with Florida and Texas among the common destinations. Primary reasons: (1) Double tax burden - 4.95% income tax + 1.88% property tax (tied for highest nationally with New Jersey), (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 above the midpoint of flat-tax states, but not the highest. Idaho (5.3%) and Georgia (4.99%) have higher flat-tax rates than Illinois. Compare: Arizona 2.5%, Indiana 2.95%, Louisiana 3%, Pennsylvania 3.07%, Kentucky 3.5%, Michigan 4.25%, Colorado 4.4%, North Carolina 3.99%, Utah 4.45%, Illinois 4.95%, Massachusetts 5%, Georgia 4.99%, Idaho 5.3%. At $100K income, Illinois charges $4,805 vs $2,098 in Arizona - more than double the lowest flat-tax state.
At $100K income + $400K home in Cook County: $4,805 income tax + $10,800 property tax (2.7% Cook County rate) + $4,100 sales tax (10.25% on $40K spending) = $19,705 total = 19.7% effective tax rate. Compare to Florida: $0 income + $3,120 property + $2,600 sales = $5,720 = 5.72% rate. Chicago residents pay 3.4x more in total state/local taxes.
At $100K income + $400K home: Florida saves $4,805 income tax + $4,400 property tax = $9,205/year. Texas saves $4,805 income tax + $1,920 property tax = $6,725/year. At $150K income + $600K home: Florida saves $13,880/year, Texas saves $10,160/year. Over 10 years, Florida move saves about $92,000-$139,000 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 tied for the highest in the nation (1.88% average, tied with New Jersey), which offsets the benefit for retiree homeowners. Illinois also has a low estate tax threshold ($4M vs $15M federal in 2026, OBBBA), 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 $15 million (2026, OBBBA). 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 53.3% to 46.7%. Another referendum is unlikely in the near term due to mistrust of state government and fear of future rate increases.
Illinois is tied with New Jersey for the highest property tax burden in America, both averaging 1.88% (Tax Foundation 2026 data). 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%, well above the statewide average.
At $100K income + $400K home, moving to Indiana saves $1,884 income tax (2.95% vs 4.95%, state tax only) + $4,480 property tax (0.76% vs 1.88%) = $6,364/year. At $150K + $600K home, savings increase to roughly $9,604/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 FL/TX (0% income tax on all investment income).
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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 (1.88%) 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 2026 property tax report (1.88% IL statewide, tied for highest nationally with New Jersey; 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.
Last Updated: May 2026
Verified By: Daniel · CountryTaxCalc
Contact: For corrections or questions, visit our contact page.
Last Updated: May 2026