Taxes in Illinois

Retirees will search far and wide for tax relief in Illinois — fees are quite steep. Below, we explain various Illinois state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.

For information regarding taxes in other states, see Retirement Taxes by State.

Illinois Tax Rates

State Sales Tax	6.25%
Avg State/Local Sales Tax	8.73%
Gas Tax	$0.42 per gallon
Diesel Tax	$0.46 per gallon
Cigarette Tax	$2.98 per pack (Chicago $6.16)
Income Tax	4.95%
Effective Tax Rate:	4.95%
Property Tax	2.30%
Social Security Tax	None
Medical/Dental Deduction:	Partial
Federal Income Tax Deduction:	None
Retirement Tax	None

Illinois State Taxes Explained

Illinois Sales Tax

6.25% combined with local sales tax. Illinois lowers the state tax to 1% on qualifying food, prescription and over-the-counter medications and medical appliances. Combined state and local tax is 6.25% to 11%.

Illinois Income Taxes

Illinois has a flat rate of 4.95%.

Illinois Property Taxes

Illinois property tax average effective rate is among the highest in the country at 2.30%. Property tax is $4,705 on a $205,000 home. Local government taxing districts impose taxes, and most residential property in the state is assessed at 33.33% of its market value. Cook County property tax for homeowners is currently 10%.

Illinois provides several property tax relief programs. Those available for taxpayers aged 65 or older and retired military personnel include:

• Senior Citizens Homestead Exemption: Reduces equalized value up to $8,000 in Cook County and $5,000 in all other counties.
• Senior Citizens Real Estate Tax Deferral Program: Defers all or a portion of real estate taxes and special assessments up to $5,000. When the homeowner sells or transfers the property or dies, the taxes are paid with 6% interest. Maximum deferral, including interest and lien fees, is 80% of the owner’s equity.
• Senior Citizens Assessment Freeze Homestead Exemption (SCAFHE): Those with an income of $65,000 or less may apply to have their property assessment frozen. The program stops real estate taxes from rising significantly.
• Homestead Exemption for Persons with Disabilities: Annual $2,000 reduction in the equalized assessed value of a primary residence owned and occupied by a person with a disability.
• Standard Homestead Exemption for Veterans with Disabilities: The exemption amount depends on the percentage of VA-certified, service-connected disability. Reduction in equalized assessed value ranges from $2,500 to $5,000. Veterans with a 70% or greater disability are completely exempted from property tax. The property’s total EAV must be less than $250,000 after subtracting any portion used for commercial purposes to qualify.
• Veterans with Disabilities Exemption for Specially-Adapted Housing: Reduces the home’s assessed value by $100,000 for certain types of housing owned and used exclusively by a veteran with a disability. Federal funds must have been used to purchase or build specially adapted housing.

See Illinois Property Relief for more information about all property tax relief programs in the state.

Illinois Retirement Taxes

Illinois does not tax Social Security benefits or retired military pay. Tax distributions from most retirement plans are also exempt. Income sources include qualified employee benefit plans, 401(k) plans, military pensions, IRAs, government retirement plans and others.

Illinois has no deduction for health care expenses, but medical insurance and long-term care insurance premiums are deductible.

Illinois Estate and Inheritance Taxes

Illinois taxes estates worth over $4 million at variable rates up to 16%. There is no inheritance tax.

For more information about estate taxes, visit the Illinois Attorney General estate tax page. To learn more about state taxes, visit the Illinois Department of Revenue, or you can email the appropriate tax assistance department.