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HEAD-TO-HEAD TAX COMPARISON · 2026

COUNTRY A Illinois VS COUNTRY B Florida

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

Daniel · CountryTaxCalc Updated September 2026 Income tax verified October 2026 Tax Comparison 2026
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OVERVIEW
This is the most surprising comparison in this series: on retirement income specifically, Illinois and Florida are tied. Illinois has a 4.95% flat income tax on wages, and its property taxes are tied for the highest in the country — but Illinois fully exempts retirement income of every kind, under Form IL-1040's Line 5 subtraction: Social Security, government pensions, private pensions, 401(k) and 403(b) distributions, and both traditional and Roth IRA withdrawals. There's no age requirement and no dollar cap — a retiree drawing $200,000 a year from a 401(k) pays exactly $0 in Illinois state income tax on it, the same as in Florida. The real financial difference between the two states for retirees isn't income tax at all — it's property tax, where Illinois' rate (tied for the highest in the US) is a genuine and ongoing cost that Florida's homestead exemption and lower average rate don't match.
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
0%
Full Retirement Income Exemption

Illinois fully exempts all retirement income — Social Security, government and private pensions, 401(k), 403(b), and IRA distributions — with no age requirement and no dollar cap

🏖️
COUNTRY B
Florida
TAX RATE
0%
No Income Tax

No state income tax — all retirement income is completely exempt regardless of amount

TYPICAL ANNUAL DIFFERENCE
Moving from Florida → Illinois at Any level — Illinois fully exempts retirement income regardless of amount
$0 (income tax) — property tax is the real difference

That's $0 income tax difference; property tax is the deciding factor 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
🏖️ FL TAX
SAVINGS
10-YEAR
$50,000 (any combination of SS, pension, 401k, IRA)
$0 — fully exempt, no age requirement, no cap
$0
Tie — both $0
$0
$80,000 (any combination of SS, pension, 401k, IRA)
$0 — fully exempt
$0
Tie — both $0
$0
$100,000+ (any combination, no cap)
$0 — fully exempt at any income level
$0
Tie — both $0, even at high income
$0
💡

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🏠

Illinois Pros & Cons

+ PROS
  • Every category of retirement income is exempt — Social Security, government pensions, private pensions, 401(k), 403(b), and both traditional and Roth IRA distributions — with no age requirement to qualify
  • No dollar cap on the exemption — this is unusual; several other states that exempt retirement income still cap the exemption at a specific dollar amount or phase it out at higher incomes, Illinois doesn't
  • Central location with strong healthcare (Chicago's major hospital systems) and easy connectivity via O'Hare for retirees who travel to see family
  • No sales tax on groceries or most services relevant to a fixed-income retiree's typical spending
− CONS
  • Property taxes are tied for the highest in the country (statewide average effective rate among the top 2, alongside New Jersey) — this is the actual cost retirees need to plan around, not income tax
  • 6,900+ independent local taxing districts make Illinois' property tax system unusually complex and opaque compared to most states
  • Illinois has an estate tax (applies above $4,000,000, not inflation-indexed, up to 16%) — unlike Florida, which has none
  • Illinois' overall fiscal position (large unfunded pension liabilities) creates ongoing political risk that the retirement-income exemption could face pressure in future legislative sessions, even though it's currently unconditional
🏖️

Florida Pros & Cons

+ PROS
  • No state income tax at all, matching Illinois' effective $0 on retirement income — but without any legislative-risk exposure since Florida simply has no income tax system to begin with
  • No state estate or inheritance tax, unlike Illinois' $4,000,000 threshold
  • Homestead exemption ($50,000) and 3% Save Our Homes assessment cap give long-term homeowners real, predictable protection against property tax growth — a sharp contrast to Illinois' famously high and complex system
  • Large, mature retirement community infrastructure (The Villages, Sarasota, Naples) built specifically for retirees
− CONS
  • Homeowner's insurance costs, driven by hurricane exposure, have risen sharply and are a real ongoing cost that doesn't exist in landlocked Illinois — $4,000-8,000+/year is common
  • Summer heat and hurricane season, versus Illinois' four-season Midwest climate
  • Further from extended family for many Midwestern retirees who've spent their working lives in or near Illinois
FAQ

Frequently Asked Questions

Does Illinois tax retirement income?

No. Illinois fully exempts Social Security, government pensions, private pensions, 401(k) and 403(b) distributions, and both traditional and Roth IRA withdrawals from state income tax. There's no age requirement to qualify and no dollar cap on the exemption — a retiree with $30,000 in retirement income pays the same $0 as a retiree with $300,000.

Is Illinois really the same as Florida for retirees?

On income tax specifically, yes — both states tax retirement income at 0%, regardless of amount. The meaningful difference between the two states for retirees is property tax: Illinois' statewide average effective rate is tied for the highest in the country, while Florida's is close to the national average and further reduced by its $50,000 homestead exemption for homeowners.

Why does Illinois have a reputation as a high-tax state if retirement income is exempt?

Illinois' 4.95% flat income tax applies to wages and most other income — it's specifically retirement income (Social Security, pensions, 401(k), IRA) that gets the full exemption. Combined with Illinois' high property taxes, the state's overall tax reputation is driven by wage-earners and homeowners, not by how it treats retirement income specifically.

Does Illinois cap the retirement income exemption at a certain income level?

No. Unlike some states that exempt retirement income only up to a certain age or phase out the exemption at higher incomes, Illinois' Form IL-1040 Line 5 subtraction applies with no dollar cap and no age requirement. A high-income retiree drawing $250,000 from a 401(k) pays exactly the same $0 in Illinois state tax as a retiree drawing $25,000.

Is Illinois' retirement income exemption at risk of changing?

It's not currently threatened by any pending legislation, but Illinois' significant unfunded pension liabilities have periodically prompted proposals to tax retirement income, none of which have passed. This is a real, if currently unrealized, political risk worth being aware of for anyone making a long-term relocation decision based on the current exemption.

Should an Illinois retiree move to Florida to save on taxes?

Not for income tax reasons — both states tax retirement income at 0%. The financial case, if there is one, comes down to property tax: Illinois retirees paying its high, complex property tax system may find meaningful savings in Florida's lower average rate and homestead exemption, but that needs to be weighed against Florida's rising homeowner's insurance costs, which can offset much of the property tax advantage.
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