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Illinois - State

Taxes in Illinois

From high property and sales taxes to full retirement income exemptions and targeted senior property tax relief programs, Illinois’ tax structure combines strong retiree income breaks with heavy local tax burdens.

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By:
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Lauren Hamer
Sr. Editor

Lauren is a Certified Financial Education Instructor℠ (CFEI®) with more than a decade of experience covering senior-related issues, retirement planning, personal finance, and consumer protection. She is passionate about helping seniors and their families make informed decisions. Her work has been published on Credible, Angi, ConsumerAffairs, and more.
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Jeff Smith
Sr. Content Manager

As Retirement Living’s senior content manager, Jeff oversees the product and publishing of all retirement, investing, and consumer wellness content on the site. His extensive expertise in brand messaging and creating data-driven stories helps position Retirement Living as a top authority for senior content and community resources.

Updated:

At a glance:

  • Illinois has one of the higher overall tax burdens for retirees, driven by steep property taxes and relatively high sales and gas taxes, though most retirement income and Social Security benefits are exempt.
  • Seniors may qualify for multiple property tax relief programs, including exemptions, assessment freezes, and deferrals, which can help offset rising home values in some areas.
  • While the state does not tax inheritances, it does impose an estate tax on larger estates, adding another consideration for long-term planning.

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.

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Illinois Tax Rates

State Sales Tax6.25%
Avg State/Local Sales Tax8.86%
Gas Tax$0.665 per gallon
Diesel Tax$0.55 per gallon
Cigarette Tax$2.98 per pack (Chicago $8.17)
Income Tax4.95%
Effective Tax Rate4.95%
Property Tax1.95%
Social Security TaxNone
Medical/Dental DeductionPartial
Federal Income Tax DeductionNone
Retirement TaxNone
State Taxes in Illinois

Illinois Tax Rates 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 8.86%.

Illinois Income Tax

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 1.95%. Property tax is $3,998 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 2.02%.

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 $7,500. When the homeowner sells or transfers the property or dies, the taxes are paid with 3% 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 $70,000 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 Inheritance and Estate 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.