$36,336 difference over 30 yearsFor one couple (both 60, $2M, 60/40, $80,000 a year to spend after tax), QuantCalc's 51-state planner study found a median 30-year income-tax bill (federal + state + IRMAA) of $162,597 in Illinois and $198,933 in Arizona — Illinois is the cheaper state by $36,336.
Illinois vs Arizona at a glance
| Factor | Illinois | Arizona |
|---|---|---|
| State income tax | 4.95% top | 2.50% top |
| Taxes Social Security | No | No |
| Taxes 401(k)/IRA | No | Yes |
| State estate/inheritance tax | Yes | No |
| Tax on $100k withdrawal | $0/yr | $1,290/yr |
| Retirement-friendliness | friendly | friendly |
| 30-yr median income tax, federal + state + IRMAA (MC) | $162,597 | $198,933 |
| 30-yr state income tax (MC) | $0 | $36,841 |
| 30-yr success rate (MC) | 84.05% | 83.27% |
| Median balance at 90 (MC) | $2,153,150 | $2,073,138 |
The income-tax difference, year by year
The simplest way to see the gap: take a married couple, both 65, whose only income is a $100,000 IRA withdrawal split evenly between them. On that withdrawal Illinois collects $0 in state income tax and Arizona collects $1,290 — a difference of $1,290 every year. Both figures are QuantCalc's state tax engine run on the couple's whole 2026 return in each state, so each state's own brackets, deductions, retirement-income exclusions and credits apply. One flat bracket that exempts all retirement income, offset by a $4M estate tax. One flat bracket since the 2023 reform, exempts Social Security.
Over a 30-year retirement, QuantCalc's 51-state planner study (one couple, identical portfolio and after-tax spending in both states, only the state changes; every year priced by the planner's federal and state tax engines) puts the median income-tax difference at $36,336.
Beyond income tax
State income tax is only part of the retirement-cost picture. When comparing Illinois and Arizona, also weigh:
- Property tax — a tax-free-income state can still have high property tax; factor your home value.
- Sales tax — affects every dollar you spend, not just income.
- Estate / inheritance tax — Illinois: has one; Arizona: none. Matters for larger estates.
- Roth conversion cost — converting in the lower-income-tax state of the two cuts the state tax on each converted dollar. See conversion-tax scenarios.
See Illinois vs Arizona on your full plan
Free: run your income, withdrawals and Roth conversions through every state's tax code — no signup.
Compare all states →Converting to Roth before or after the move? See the Roth Conversion Planner.
Compare other states
Deep-dive either state: Illinois retirement tax guide · Arizona retirement tax guide. Or see the full 50-state comparison and the 51-state Monte Carlo study.
FAQ
Is Illinois or Arizona better for retirement taxes?
On income tax, Illinois is the lighter-tax state. In QuantCalc's 51-state planner study, one couple (both 60, $2M, $80,000 a year to spend after tax) pays a median $162,597 of federal and state income tax and IRMAA over 30 years in Illinois versus $198,933 in the other — a $36,336 difference on identical income and spending.
Does Illinois tax Social Security and 401(k) withdrawals?
Illinois does not tax Social Security benefits and exempts 401(k)/traditional IRA distributions at the state level. One flat bracket that exempts all retirement income, offset by a $4M estate tax.
Does Arizona tax Social Security and 401(k) withdrawals?
Arizona does not tax Social Security benefits and taxes 401(k)/traditional IRA distributions at the state level. One flat bracket since the 2023 reform, exempts Social Security.
How much would moving from Illinois to Arizona save on retirement taxes?
For a married couple, both 65, whose only income is a $100,000 IRA withdrawal split evenly between them, the state income tax is $0 in Illinois versus $1,290 in Arizona — $1,290 per year of difference. Over 30 years, the planner study's median income-tax gap was $36,336. Don't forget property tax, sales tax, and estate tax also differ — see the table above.
Last updated 2026-10-28. State tax data 2026 (Tax Foundation + state DoR); the withdrawal figures are QuantCalc's state tax engine. Monte Carlo figures from the QuantCalc 51-state planner study (v2026.3, re-run 2026-10-12, CC-BY-4.0): one couple, both 60, $2M, 60/40, $80,000 a year to spend after tax, in each state. Educational only, not tax advice.