Illinois's Flat 4.95%, Same Rate at $40k or $400k
Illinois taxes all wage income at a single flat 4.95%, a rate that has held since 2011. A graduated "Fair Tax" amendment that would have raised rates on high earners was rejected by voters in 2020, so the flat structure stays. Illinois has no standard deduction, but it grants a personal exemption of $2,925 per person for 2026. A single filer earning $80,000 has about $77,075 of Illinois taxable income and owes roughly $3,815, an effective state rate near 4.8%, the same marginal rate every Illinois earner pays.
Illinois Doesn't Tax Retirement Income
Illinois is unusually generous on retirement income for a state that taxes wages: pensions, 401(k) and IRA distributions, and Social Security benefits all escape the 4.95% state tax (federal tax still applies). A worker still drawing a salary while taking early retirement-account distributions can shelter that second income stream from Illinois entirely. It is one of the strongest retiree-friendly features among income-tax states and a real factor when comparing Illinois to neighbors.
No Local Income Tax, But Property Tax Bites
Unlike Ohio or Pennsylvania, no Illinois municipality levies a local income tax, so the flat 4.95% is your entire sub-federal wage tax. The offset lands on homeowners: Illinois property tax averages around 2.1% of home value, among the highest in the nation. So while the wage tax is moderate and predictable, the cost of owning a home in Illinois claws back much of that advantage, the no-local-income-tax simplicity comes with one of the steepest property bills in the country.
What a Flat Rate Means for Planning
Because the rate never changes with income, there is no bracket to manage in Illinois. Timing a bonus, exercising options, or running a Roth conversion will not push you into a higher state rate the way it would in a graduated state, the state cost is always 4.95% of the additional taxable dollar. A traditional 401(k) contribution still saves that flat 4.95% in state tax on top of your federal bracket, so pre-tax deductions remain worthwhile; they just do not carry the bracket-shifting bonus that graduated states offer.
Who Comes Out Ahead in Illinois
The flat structure favors high earners, who escape the rising top rates that graduated neighbors apply to large salaries, and retirees, whose distributions are untaxed at the state level. Homeowners feel the trade-off most, since Illinois funds local government through property tax rather than local income tax. Before relocating, weigh the 4.95% wage tax against the property bill using our State Tax and Housing Comparison tool, the income-tax line alone understates the Illinois picture.
Illinois's 20% Earned Income Credit
Illinois pairs its flat tax with a refundable Earned Income Credit worth 20% of your federal EITC (Illinois Department of Revenue), claimed on Schedule IL-E/EITC with the IL-1040 return. The credit was recently raised from 18% to 20% and broadened to cover filers the federal credit leaves out, including some workers aged 18 to 24 and 65-plus, and filers using an ITIN. Because it is refundable, it pays out even when no Illinois tax is owed, so a lower-income worker can come out ahead of the flat 4.95% on net. If your income is modest, it is worth checking eligibility rather than assuming a flat-tax state offers no credits.
Why Illinois Stays Flat: the 2020 Fair Tax Vote
Illinois cannot adopt graduated brackets without changing its constitution, which mandates a single flat income tax rate. In 2020 voters were asked to approve a "Fair Tax" amendment that would have allowed higher rates on higher incomes; it was defeated, so the flat 4.95% stays in place and applies identically at $40,000 or $400,000. Proposals to revisit a graduated structure resurface periodically, but as of 2026 the flat rate is constitutionally locked in. For planning, that means no bracket to climb into, and it is the reason high earners often fare better in Illinois than in a graduated neighbor while the property-tax bill does the heavy lifting instead.
The Retiree Trap: Illinois Is More Generous Than People Realize
A surprising number of Illinois retirees overpay because they do not realize how complete the retirement-income exemption is. Illinois taxes none of it: not Social Security, not pensions, not 401(k) or IRA withdrawals (Illinois Department of Revenue, Publication 120). A retiree who leaves state withholding switched on, or who makes estimated payments out of habit, hands the state money it will simply refund. The fix is to stop withholding on retirement distributions and skip the estimated payments on that income. Between the full retirement exemption and the flat working-age rate, Illinois is one of the most retirement-friendly income-tax states in the country, a fact its high property taxes tend to overshadow.
Withholding, Filing, and Illinois Property-Tax Relief
Because the rate is a flat 4.95%, Illinois withholding is simple, but you can still tune it on Form IL-W-4, where allowances reduce how much is held back. Residents file Form IL-1040 by April 15, e-filed for free through MyTax Illinois. The bigger lever for most Illinois households is property tax, the trade-off for the flat income tax, and the state offers relief worth claiming: the General Homestead Exemption reduces the taxable value of an owner-occupied home, and the Senior Citizens Assessment Freeze locks the assessed value for qualifying older homeowners with limited income. Neither shows up on your paycheck, but for an Illinois homeowner they move the total tax bill more than any payroll tweak will.
Social Security and Medicare (FICA) are federal, so they come out the same in Illinois as in every other state. The main Paycheck Calculator walks through the full federal side, including the Social Security wage base and the Additional Medicare surtax.