Illinois does not have a lower rate for long-term capital gains and does not tax gains in a separate system. A resident starts the Illinois return from the federal adjusted gross income (AGI), so every gain in that figure is taxed at the same flat rate as wages.
This guide explains how that works, what changes for nonresidents and part-year residents, the one place where a large gain can cost more than 4.95 percent (the personal exemption cut-off), and how the pass-through replacement tax fits in, using the Illinois Department of Revenue's 2025 return instructions and tax-rate page read on 2 November 2026.
The Department of Revenue states the rate in its return instructions: "The Illinois income tax rate is 4.95 percent (.0495)." Its tax-rate page gives the same figure for individuals, effective July 1, 2017. The pages we read give no separate capital gains rate and no holding-period rule, so short-term and long-term gains are taxed alike at the Illinois level (the federal return still distinguishes them).
For a resident the Illinois return begins with the federal return: line 1 tells you to enter the adjusted gross income from your federal return. The department's worksheet for splitting a joint federal return lists "Capital gain or loss (federal Form 1040 or 1040-SR, Line 7a)" among the income items carried over. A gain that is in your federal AGI is therefore in the Illinois income figure before Illinois additions and subtractions.
One subtraction touches gains: the line 5 instructions include certain capital gains on employer securities reported on federal Form 1040, line 7a, in the retirement income subtraction. The department refers to its Publication 120 for the detail, so read it before relying on that subtraction.
The Schedule NR instructions set out what is taxed for a nonresident, and for a part-year resident for the time spent outside Illinois:
Capital losses may be included only to the extent they were included in your federal adjusted gross income.
If you pay tax to another state on the same income, the instructions refer to Schedule CR, Credit for Tax Paid to Other States, and to the Schedule CR instructions for the rules.
The rate is flat, but the personal exemption is not. For tax year 2025 the exemption amount is $2,850. The instructions also say that if your federal filing status is single, head of household, married filing separately or widowed and your federal AGI is greater than $250,000, you are not entitled to an exemption allowance (the limit is $500,000 for married filing jointly). Next-year note: the Department of Revenue's Informational Bulletin FY 2026-15 (December 2025) says the exemption amount for tax year 2026 will increase to $2,925; the $250,000 and $500,000 AGI limits in that bulletin are unchanged. The table below stays on the 2025 figures. A gain that lifts AGI above the limit therefore removes the exemption for the whole return.
| Our illustration (single filer, resident) | AGI before gain | Gain | AGI with gain | Exemption | Illinois tax before | Illinois tax after | Added by the gain | As % of gain |
|---|---|---|---|---|---|---|---|---|
| Moderate income, $20,000 gain | $60,000 | $20,000 | $80,000 | $2,850 | $2,828.93 | $3,818.93 | $990.00 | 4.95% |
| Mid income, $50,000 gain | $120,000 | $50,000 | $170,000 | $2,850 | $5,798.93 | $8,273.93 | $2,475.00 | 4.95% |
| Gain pushes AGI over $250,000 | $200,000 | $100,000 | $300,000 | $0 | $9,758.93 | $14,850.00 | $5,091.07 | 5.09% |
These are our own calculations, not official figures. They use the 2025 rate of 4.95 percent and the 2025 exemption of $2,850 for one person, assume AGI equals Illinois income with no other additions, subtractions or credits, and ignore any exemption for dependents. In the last row the $100,000 gain is taxed at 4.95 percent ($4,950) and the lost exemption adds $141.07 ($2,850 x 4.95%), so the extra Illinois tax is 5.09 percent of the gain. The amounts are the 2025 ones we read; check the current year's instructions for later years.
The Department of Revenue's tax-rate page lists a separate personal property replacement tax: 2.5 percent of net income for corporations other than S corporations, and 1.5 percent of net income for partnerships, trusts and S corporations. It is a tax on entity net income, and the page we read does not say how it applies to a particular capital gain or to an owner's own return. If a gain arises inside a partnership, S corporation or trust, check the entity's Illinois return instructions or ask a tax professional.
An Illinois resident who sells an asset reports the gain on the federal return as well, and federal tax is separate from the Illinois tax described here. We do not give federal capital gains rates on this page; use the IRS pages for those. This guide covers the Illinois state income tax only.
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