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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 Income tax verified October 2026 Tax Comparison 2026
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OVERVIEW
Alabama is cheaper than Illinois on state income tax at every income level shown, from $50,000 to $500,000: at $100,000 Alabama's state tax is $4,102 versus Illinois's $4,805 — $703/year less — and the gap widens to $6,897/year at $500,000. Illinois's flat 4.95% and Alabama's top 5% rate are less than a percentage point apart, but Alabama lets filers deduct federal income tax paid from state taxable income, which more than offsets its slightly higher top rate and widens the gap as income rises. 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 five times Alabama's (~0.37%, 2nd-lowest nationally) — a gap worth roughly $6,040/year on a $400,000 home, which is larger than the income-tax difference at every income level shown below $500,000. 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
$703

That's $59/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
$2,330
$2,069
$261 (AL cheaper)
$2,610
$75,000
$3,568
$3,127
$441 (AL cheaper)
$4,410
$100,000
$4,805
$4,102
$703 (AL cheaper)
$7,030
$150,000
$7,280
$6,023
$1,257 (AL cheaper)
$12,570
$250,000
$12,230
$9,695
$2,535 (AL cheaper)
$25,350
$500,000
$24,750
$17,853
$6,897 (AL cheaper)
$68,970
💡

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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
  • Simple flat 4.95% rate on all taxable income, versus Alabama's three 2%/4%/5% brackets
  • 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 five times Alabama's ~0.37%, worth about $6,040/year more on a $400,000 home
  • Higher income tax than Alabama at every income level shown — costs $261 to $703/year more from $50,000 to $100,000, and $6,897/year more at $500,000
  • $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
  • Cheaper than Illinois at every income level shown — saves $261 to $703/year from $50,000 to $100,000, and $6,897/year at $500,000
  • One of the lowest average property tax rates in the country (~0.37%, 2nd-lowest nationally) — less than a fifth of Illinois's ~1.88%, saving roughly $6,040/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
  • Alabama's 5% top rate (starting at just $3,000 of taxable income) is slightly above Illinois's flat 4.95%, though its federal-income-tax deduction more than offsets this
  • 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?

Alabama is cheaper at every income level shown. At $100,000, Alabama's $4,102 beats Illinois's $4,805 by $703/year, and the gap grows to $6,897/year at $500,000, mainly because Alabama lets filers deduct federal income tax paid.

Do Illinois and Alabama ever cross over?

Not at the incomes shown. Illinois taxes (income - $2,925) at a flat 4.95%. Alabama's compressed 2%/4%/5% brackets apply after its $1,500 personal exemption, an income-tested standard deduction (which floors at $2,500), and a deduction for federal income tax paid. That federal-tax deduction grows with income, so Alabama's state tax stays below Illinois's at every income from $50,000 to $500,000.

Which state has lower property tax, Illinois or Alabama?

Alabama has a dramatically lower average effective property tax rate at roughly 0.37% — 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 $1,480/year in Alabama versus $7,520/year in Illinois, a savings of about $6,040/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 on both counts: it is cheaper on income tax at every income level shown ($703/year at $100,000), and its roughly $6,040/year property-tax advantage on a $400,000 home adds to that.

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 $703/year in state income tax. Once you add in Alabama's much lower property tax (~0.37% vs Illinois's ~1.88%), the combined savings on a $400,000 home reach roughly $6,743/year — the property tax difference dominates the overall comparison.

Why is Alabama's income tax lower than Illinois's at similar rates?

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. The headline rates are less than a full percentage point apart, but Alabama's deduction for federal income tax paid grows with income, so Alabama's edge is $261 at $50,000, $703 at $100,000, and $6,897 at $500,000.

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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