What is the Illinois state income tax rate in 2026?
Illinois taxes income at a flat 4.95% in 2026. Example: a married couple, both 70, with $40,000 of Social Security, a $30,000 private pension and $30,000 of IRA withdrawals ($100,000 in all; the pension and IRA money split evenly between them) owes $0 of Illinois income tax (0.0% of their income) and $5,087 of federal tax; a single 62-year-old with $24,000 of Social Security, an $18,000 pension and $18,000 of IRA withdrawals ($60,000 in all) owes $0 to Illinois and $4,111 federal. The schedule, how Illinois treats each kind of retirement income, and its local taxes follow.
How Illinois taxes retirement income in 2026
| Standard deduction or personal exemption | $2,925 single, $5,850 married filing jointly, and the single amount for head of household. (Illinois Department of Revenue; rules) |
|---|---|
| Social Security | Social Security benefits are fully exempt: none of the federally taxable amount enters the state base. (Illinois Department of Revenue; rules) |
| Pensions, annuities and IRA/401(k) withdrawals | Pension, annuity and IRA/401(k) distributions are fully excluded at any age. No dollar cap and no income limit. (Illinois Department of Revenue; rules) |
| Age 65 and older | At age 65 or older: $1,000 is subtracted from the base ($2,000 for a married couple filing jointly when both qualify), against any income. (Illinois Department of Revenue; rules) |
| Capital gains | Net long-term gain is taxed as ordinary income. Short-term gains are ordinary income. (Illinois Department of Revenue; rules) |
Local income taxes: none in Illinois. The local income taxes the tax engine computes for 2026 are in Delaware, Indiana, Iowa, Kentucky, Maryland, Michigan, Missouri, New York, Ohio, Oregon and Pennsylvania.
Your whole 2026 return in Illinois, federal and state together, ends in a refund or an amount owed: 2026 tax return calculator (free) → What five typical retiree households owe or get back in Illinois and every other state: the 2026 tax return study.
Figures for 2026 from QuantCalc’s open tax engine (federal 2.3.2, state 1.14.2), for a full-year resident. An estimate, not tax advice: credits, itemized deductions and rules this page does not ask about change a real return. Every Illinois rule with its official sources: Illinois rules and sources.
In our 510,000-path Monte Carlo study of 30-year retirement outcomes, Illinois retirees finished at 75.99% success rate (ranked #10 of 51 by success rate, #3 of 51 by lowest median lifetime state tax). Median 30-year state-tax cost: $0. Median terminal balance after 30 years: $972,093. State tax is part of the optimization here — the playbook below shows the federal-state-ACA stack.
The IL verdict
For a retiree planning withdrawals in 2026, Illinois is broadly retirement-tax-friendly, with most distributions sheltered. One flat bracket that exempts all retirement income, offset by a $4m estate tax.
Illinois exempts qualified retirement income — pensions, 401(k) and IRA distributions alike — so a withdrawal costs $0 in state income tax, and a conversion out of one of those accounts is treated the same way. The binding constraints on a Illinois conversion ladder are the federal bracket, the 400% FPL ACA cliff and the IRMAA two-year lookback, not the state rate.
Worked example: $30k Roth conversion in Illinois
Consider a married couple age 58 in Illinois with $75,000 of ordinary income (their MAGI), both on ACA Marketplace coverage. They want to convert $30,000 from a traditional IRA to a Roth. The Illinois state tax on that conversion is approximately $0 — Illinois exempts qualified retirement income, and a conversion is a distribution from a qualified account. Federal income tax adds another $3,600 — the whole conversion is taxed in the federal 12% bracket. And because the conversion pushes their MAGI to $105,000 — over the 400% FPL cliff of $84,600 — they lose their full ACA premium tax credit, $23,441 a year at Illinois's average benchmark Silver premium. Total cost of the $30,000 conversion: about $27,041, or an effective 90.1% marginal rate. Illinois applies one rate to all taxable income, so that state figure is the full amount before any deduction Illinois allows. The federal-state-ACA stack matters in Illinois.
Cost breakdown
| Component | Amount |
|---|---|
| Federal income tax (12% bracket) | $3,600 |
| Illinois state income tax | $0 |
| ACA premium tax credit clawback | $23,441 |
| Total cost on $30,000 conversion | $27,041 (90.1% effective) |
Scenario B (friendly): $50k post-65 conversion in Illinois
A married Illinois couple age 67, both on Medicare, with $40K pension income converts $50,000 in a single year. State tax owed: $0 — Illinois exempts qualified retirement income, and a conversion is a distribution from a qualified account. Federal income tax added: $4,607 ($7,500 of the added income fills deductions their pension left unused and the rest is taxed in the federal 10%–12% brackets). No ACA clawback (on Medicare). Total: $4,607, or 9.2% effective. The post-65 conversion window is where a Illinois ladder is cheapest.
What the Monte Carlo data says about Illinois
QuantCalc Research ran a 30-year, 10,000-path Monte Carlo simulation for an identical representative retiree (age 60, $2M starting balance, 60/40 portfolio, $80K real annual spend) in each of the 51 U.S. jurisdictions. Here's how Illinois compared to the best- and worst-case states:
| Metric | Illinois | Wyoming (best) | California (worst) |
|---|---|---|---|
| 30-year success rate | 75.99% | 77.11% | 69.03% |
| Rank (of 51) | #10 | #1 | #51 |
| Median lifetime state tax (30y) | $0 | $0 | $154,980 |
| Median total tax (30y) | $218,400 | $218,400 | $373,380 |
| Median terminal balance | $972,093 | $999,751 | $695,612 |
| Δ success vs Wyoming | -1.12 pp | — | −8.08 pp |
Sources: QuantCalc 51-State Monte Carlo Study (2026-05-12) — 510,000 total paths, methodology fully documented and dataset released CC-BY-4.0. Illinois's row in the dataset uses the same portfolio + spend + retirement age as every other state — the only variable is state tax treatment.
Modeling 401(k) withdrawals and Roth conversions in Illinois
Illinois exempts all retirement income from its 4.95% flat income tax — Social Security, 401(k) and IRA distributions, and pensions. A regular 401(k) or IRA withdrawal therefore costs an Illinois retiree $0 in state income tax.
A Roth conversion is a federally taxable event, but because the converted dollars come out of a retirement plan, they fall under Illinois's retirement-income exemption — the conversion is generally federally taxed and Illinois-exempt. When modeling an Illinois conversion ladder, the binding constraints are the federal bracket, the 400% FPL ACA cliff, and the IRMAA two-year lookback — not state tax. One Illinois-specific caveat to keep in the model: the state levies an estate tax with a $4M exemption, so large balances preserved by an aggressive conversion strategy can re-surface as an estate-tax exposure at death.
How Illinois treats capital gains in retirement
Illinois taxes long-term capital gains as ordinary income at the same top bracket rate (4.95%). That stacks on top of federal LTCG (0%/15%/20%) and the 3.8% NIIT for high earners. A 'free' federal 0% LTCG harvest still costs you up to 4.95% at the state level — meaningful in this jurisdiction, particularly during Roth-conversion years when your MAGI is already elevated.
Why the ACA cliff hits hard in Illinois
The 400% federal-poverty-level cliff is federal, not state-specific — but its dollar impact depends on the benchmark Silver-plan premium in your county. Illinois's Marketplace pricing and your household composition determine the size of the subsidy at risk. A couple aged 58 with MAGI of exactly $84,600 still has $22,485 a year of premium tax credit at Illinois's average benchmark Silver premium, and all of it is on the line. With the 2021–2025 enhanced credit expired, $1 of additional MAGI above 400% FPL eliminates the entire credit.
For 2026 the 400% FPL threshold is:
- Household of 1: $62,600
- Household of 2: $84,600
- Household of 3: $106,600
- Household of 4: $128,600
Roth conversion strategy for Illinois
The IL-specific playbook depends on tier:
- Identify your cliff distance. Compute MAGI from all income sources (wages, capital gains, interest, dividends, traditional withdrawals). Find your headroom under 400% FPL. Use the live cliff widget above for a quick check.
- Stay under the cliff if you can. In Illinois at 4.95%, the marginal cost of going over the cliff is federal tax + state tax + full PTC clawback. The break-even conversion size is smaller than in tax-free states.
- If you must go over, convert big. Once you've crossed the cliff, additional conversion dollars only cost federal + state tax (no incremental PTC loss). A "rip the bandage" conversion year can be efficient if you have many traditional dollars to move.
- Coordinate with capital gains and the 0% LTCG bracket. Illinois taxes long-term capital gains as ordinary income at the same top bracket rate (4.95%). That stacks on top of federal LTCG (0%/15%/20%) and the 3.8% NIIT for high earners. A 'free' federal 0% LTCG harvest still costs you up to 4.95% at the state level — meaningful in this jurisdiction, particularly during Roth-conversion years when your MAGI is already elevated.
- Plan ahead for IRMAA. The IRMAA Medicare premium surcharge has a 2-year lookback. A Illinois resident in their early 60s converting today will see IRMAA implications at 65. See RMD + IRMAA calculator for the lookback math.
State tax basics for Illinois retirees
| Question | Illinois |
|---|---|
| State income tax | 4.95% top marginal |
| Number of brackets | 1 |
| Social Security taxed | No |
| 401(k) / Traditional IRA taxed | No / exempt |
| Retirement-income exclusion (couple) | Full exemption |
| Roth conversion draws that exclusion | Not applicable |
| State estate / inheritance tax | Yes |
| Retirement-friendliness tier | friendly |
| Notable feature | one flat bracket that exempts all retirement income, offset by a $4M estate tax |
| 30-yr MC success rate (rank) | 75.99% (#10/51) |
| Median 30-yr state tax | $0 |
Model your full Illinois retirement scenario
Free Monte Carlo (100 paths per run; 10,000 with PRO) with state-specific tax engine, ACA cliff, Roth conversion optimizer, IRMAA lookback — free, no signup.
Run a free simulation →What a year-end move does to your Illinois and federal tax in 2026
Each move changes three bills at once: the federal return, the Illinois return and, for anyone on Medicare, the IRMAA surcharge the 2026 income sets for 2028. Example: a married couple, both 72, with a $40,000 pension, $50,000 of Social Security, a $30,000 IRA withdrawal and $10,000 of long-term gains already realized in 2026, the pension, the IRA money and the conversion split evenly between them on the state return. Each row is that year with one move made, against the same year without it (negative = less tax).
| Move (by December 31, 2026) | Federal tax | Illinois tax | IRMAA in 2028 |
|---|---|---|---|
| Convert $25,000 to a Roth IRA | $3,165 | $0 | $0 |
| Send $10,000 of the IRA withdrawal to charity as a QCD | −$1,200 | $0 | $0 |
| Harvest a $5,000 loss against the year's gains | $0 | −$106 | $0 |
An estimate from QuantCalc’s open tax engine (federal 2.3.2, state 1.14.2) for the 2026 tax year. Not tax advice: your return depends on facts this page does not ask about, so check a move with your tax preparer or custodian before acting. IRMAA uses the 2026 tiers for two people on Medicare; the 2028 tiers are not published yet. How the engine computes each line, with its official source: federal, Illinois.
Related calculators and reading
- All-states retirement tax comparison — see Illinois alongside the other 50 jurisdictions.
- State Retirement Tax Data 2026 — the per-jurisdiction rate, exclusion and Social Security figures behind this page, as CSV and JSON.
- ACA Subsidy Cliff Optimizer — find the largest Roth conversion that keeps you under 400% FPL.
- Roth Conversion Optimizer — bracket-fill vs. fixed-amount strategy comparison.
- RMD + IRMAA Calculator — Medicare premium surcharge based on 2-year-old MAGI.
- Safe Withdrawal Rate Calculator — sequence-of-returns-aware withdrawal planning.
- Research: 51-State 30-year Monte Carlo (2026) — full ranking and dataset.
- Research: Monte Carlo ACA Cliff 2026 — 80,000-path study of the cliff cost.
FAQ
What is the Illinois state income tax rate in 2026?
Illinois taxes income at a flat 4.95% in 2026. The full schedule and Illinois's deductions are on this page (Illinois Department of Revenue; rules).
How much state income tax does a retiree pay in Illinois?
It depends on the kind of income. In 2026, a married couple, both 70, with $40,000 of Social Security, a $30,000 private pension and $30,000 of IRA withdrawals ($100,000 in all; the pension and IRA money split evenly between them) owes $0 of Illinois tax, and a single 62-year-old with $24,000 of Social Security, an $18,000 pension and $18,000 of IRA withdrawals ($60,000 in all) owes $0. Federal tax comes on top: $5,087 and $4,111.
Does Illinois tax Social Security benefits?
No. Social Security benefits are fully exempt: none of the federally taxable amount enters the state base. (Illinois Department of Revenue; rules)
Does Illinois tax pensions, 401(k) and IRA withdrawals?
Pension, annuity and IRA/401(k) distributions are fully excluded at any age. No dollar cap and no income limit. (Illinois Department of Revenue; rules)
Does Illinois have local income taxes?
No. No county, city or school district in Illinois levies an income tax that the tax engine computes for 2026.
Does Illinois tax Roth conversions?
Illinois taxes Roth conversions as ordinary income at the state level. A $30,000 conversion by a couple aged 58 costs about $0 in state tax alone — Illinois exempts qualified retirement income, and a conversion is a distribution from a qualified account — on top of federal tax and any ACA subsidy clawback. Illinois applies one rate to all taxable income, so that state figure is the full amount before any deduction Illinois allows.
What is Illinois's 30-year Monte Carlo retirement success rate?
In QuantCalc's 510,000-path Monte Carlo study, a representative retiree in Illinois (age 60, $2M balance, 60/40 portfolio, $80K real spend) finished 30 years at 75.99% success rate — ranked #10 of 51 jurisdictions. Median 30-year state tax: $0. Median terminal balance: $972,093.
What is the ACA cliff in Illinois for 2026?
The ACA premium-tax-credit cliff is a federal threshold, not state-specific. For a household of two in 2026, it sits at 400% of the federal poverty level — $84,600. Crossing it by even $1 of MAGI eliminates the full subsidy now that the 2021-2025 enhanced credit has expired.
Is Illinois a good state to retire for tax purposes?
Illinois is broadly retirement-tax-friendly, with most distributions sheltered. One flat bracket that exempts all retirement income, offset by a $4m estate tax. In our Monte Carlo ranking it placed #10 of 51 jurisdictions.
Does Illinois have a state estate or inheritance tax?
Yes — Illinois has a state-level estate or inheritance tax in addition to the federal estate tax. Plan transfers accordingly.
How does Illinois tax capital gains?
Illinois taxes long-term capital gains as ordinary income at the same top bracket rate (4.95%). That stacks on top of federal LTCG (0%/15%/20%) and the 3.8% NIIT for high earners. A 'free' federal 0% LTCG harvest still costs you up to 4.95% at the state level — meaningful in this jurisdiction, particularly during Roth-conversion years when your MAGI is already elevated.
Last updated 2026-10-02. State income tax figures reflect the 2026 schedule published by Illinois's tax authority. ACA poverty-level figures: the 2025 HHS poverty guidelines for the 48 contiguous states and DC ($15,650 for one person, plus $5,500 for each additional person; 90 FR 5917), which set 2026 Marketplace coverage. Premium tax credit estimates use Illinois's average benchmark Silver premium. Monte Carlo numbers from the QuantCalc 51-state research drop (2026-05-12, CC-BY-4.0). This page is educational. Not tax, legal, or financial advice — consult a qualified advisor.