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HEAD-TO-HEAD TAX COMPARISON · 2026

COUNTRY A Illinois VS COUNTRY B Alabama

Side-by-side analysis of income tax, effective rates, and take-home pay for Illinois and Alabama in 2026.

Daniel · CountryTaxCalc Updated August 2026 Tax Comparison 2026
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OVERVIEW
Illinois and Alabama are among the closest tax comparisons on the entire site, with a precise, mathematically exact crossover point: at exactly $246,100 of income, both states charge identical state tax. Below that threshold, Alabama's near-flat 2-5% structure is marginally cheaper — by $73/year at $100,000 ($4,080 in Alabama vs $4,153 in Illinois) — while above $246,100, Illinois's flat 4.95% pulls slightly ahead, saving about $127/year at $500,000. The dollar differences stay small at every income level because Illinois's flat 4.95% and Alabama's effective near-flat 5% are less than a percentage point apart. Property tax tells a far bigger story: Illinois's average effective rate (~1.88%, tied for the highest in the US with New Jersey) is more than four times Alabama's (~0.41%, 2nd-lowest nationally) — a gap worth roughly $5,880/year on a $400,000 home, which dwarfs the income-tax difference in either direction. On retirement income, Illinois is considerably more generous: it fully exempts Social Security, pensions, and 401(k)/IRA withdrawals from state tax at any age, while Alabama exempts Social Security and public pensions but taxes private pensions and 401(k)/IRA withdrawals at 2-5% (with an extra $6,000-$12,000 exemption for filers 65+).
Section 01

The Big Picture

Top-line rates and effective take-home for a typical earner — including income tax, social contributions, and applicable surcharges.

🌽
COUNTRY A
Illinois
TAX RATE
4.95%
Flat Tax
Flat 4.95% rate on all income — highest flat-tax rate in the US; no local income tax anywhere
🏈
COUNTRY B
Alabama
TAX RATE
2-5%
3-Bracket Progressive
Top 5% rate starts at just $3,000 of taxable income, functioning like a near-flat tax for most workers
TYPICAL ANNUAL DIFFERENCE
Moving from Alabama → Illinois at $100,000
$73
That's $6/month back in your pocket
Section 02

Tax Savings by Income Level

Net take-home after all income tax, social contributions, and surcharges — for a single employee with no dependents.
GROSS INCOME
🌽 IL TAX
🏈 AL TAX
SAVINGS
10-YEAR
$50,000
$1,678
$1,580
$98 (AL cheaper)
$980
$75,000
$2,916
$2,830
$86 (AL cheaper)
$860
$100,000
$4,153
$4,080
$73 (AL cheaper)
$730
$150,000
$6,628
$6,580
$48 (AL cheaper)
$480
$250,000
$11,578
$11,580
$2 (IL cheaper)
$20
$500,000
$23,953
$24,080
$127 (IL cheaper)
$1,270
💡

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🌽

Illinois Pros & Cons

+ PROS
  • Fully exempts all retirement income: Social Security, pensions, and 401(k)/IRA withdrawals are all tax-free at the state level, at any age — a meaningfully stronger exemption than Alabama's partial coverage
  • Overtakes Alabama on income tax above $246,100 (the exact mathematical crossover point), saving up to $127/year at $500,000
  • No local income tax anywhere in the state — no city adds a wage tax on top of the flat state rate
  • Chicago's deep finance, tech, and manufacturing job market offers salaries that can outweigh the state's much higher property tax burden
− CONS
  • Highest average property tax in the country (tied with New Jersey at ~1.88%) — more than four times Alabama's ~0.41%, worth about $5,880/year more on a $400,000 home
  • Slightly higher income tax than Alabama for anyone earning under $246,100 — costs $48 to $98/year more at the income levels most workers fall into
  • $139 billion in unfunded pension liabilities creates ongoing risk of future state tax increases
  • Illinois's flat 4.95% applies from the first dollar of taxable income, with no $0 bracket like Alabama's small 2%/4% starter brackets
🏈

Alabama Pros & Cons

+ PROS
  • Marginally cheaper than Illinois for anyone earning under $246,100 — Alabama's near-flat 2-5% structure saves $48 to $98/year at typical income levels
  • One of the lowest average property tax rates in the country (~0.41%, 2nd-lowest nationally) — less than a quarter of Illinois's ~1.88%, saving roughly $5,880/year on a $400,000 home
  • Fully exempts Social Security and all public pensions (state employees, teachers, military); private retirement income gets an extra $6,000-$12,000 exemption at 65+
  • One of only two states (with Oregon) that lets filers deduct federal income tax paid from state taxable income, reducing the effective burden further for higher earners
− CONS
  • Slightly more expensive than Illinois above $246,100 of income, since Alabama's effective near-flat 5% edges past Illinois's flat 4.95%
  • No blanket exemption for private pensions, 401(k), or IRA withdrawals — taxed at 2-5%, unlike Illinois's full exemption at any age
  • Job market outside Huntsville's aerospace/defense sector pays significantly less; Alabama's median household income trails Illinois's
  • Sales tax can be steep in cities like Birmingham and Mobile (up to 10-11% combined), partially offsetting the property-tax savings
FAQ

Frequently Asked Questions

Is Illinois or Alabama cheaper for state income tax?

It's extremely close. Alabama is marginally cheaper below $246,100 of income — at $100,000, Alabama's $4,080 beats Illinois's $4,153 by just $73/year. Above $246,100, Illinois pulls slightly ahead, saving about $127/year at $500,000. The two states are in exact mathematical parity at precisely $246,100 of income, where both charge $11,385 in state tax.

Why do Illinois and Alabama cross over at exactly $246,100?

Illinois taxes (income - $16,100) at a flat 4.95%. Alabama effectively taxes (income - $17,600) at close to 5% above a small threshold, working out to 5% of income minus a fixed $920 offset. Setting the two formulas equal and solving algebraically gives income = $246,100 — the one point where both states' near-identical rates produce an identical dollar amount of tax.

Which state has lower property tax, Illinois or Alabama?

Alabama has a dramatically lower average effective property tax rate at roughly 0.41% — the 2nd-lowest in the nation — compared to Illinois's roughly 1.88%, tied for the highest in the US with New Jersey. On a $400,000 home, that's about $1,640/year in Alabama versus $7,520/year in Illinois, a savings of about $5,880/year that dwarfs the small income-tax difference between the two states.

So which state actually wins on combined income plus property tax?

Alabama wins clearly once property tax is added in, regardless of income level. Even in the income ranges where Illinois's income tax is technically lower (above $246,100), Alabama's roughly $5,880/year property-tax advantage on a $400,000 home is far larger than any income-tax gap between the two states.

Does either state tax retirement income like 401(k) and IRA withdrawals?

Illinois fully exempts Social Security, pensions, and 401(k)/IRA withdrawals from state tax at any age. Alabama exempts Social Security and all public pensions but taxes private pensions and 401(k)/IRA withdrawals at 2-5%, with an extra $6,000 (single) or $12,000 (married) exemption for filers 65+. For retirees drawing heavily on a private 401(k) or IRA, Illinois is meaningfully more favorable.

How much would I save moving from Illinois to Alabama?

At $100,000 income, moving from Illinois to Alabama saves about $73/year in state income tax. Once you add in Alabama's much lower property tax (~0.41% vs Illinois's ~1.88%), the combined savings on a $400,000 home reach roughly $5,953/year — the property tax difference dominates the overall comparison.

Why is the income tax difference between Illinois and Alabama so small?

Illinois uses a flat 4.95% rate, and Alabama's three brackets (2%, 4%, 5%) compress so quickly that its top 5% rate applies to almost all income above $3,000 of taxable income — functioning like a near-flat tax. With less than a full percentage point separating the two effective rates, the dollar gap stays under $100/year across most income levels tested here.

Does either state have a local or city income tax?

Illinois has no local income tax anywhere in the state. Alabama allows some cities, including Birmingham, to levy a small local occupational tax (around 1%) on wages earned within city limits, separate from the state income tax shown in this comparison.
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