Illinois Pay Stub, Paycheck & Tax Guide
Everything you need to know about Illinois payroll requirements, paycheck withholding, income tax and sales tax — all in one place.
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Illinois has the simplest income tax of any large state and one of the most complicated everything-else. A flat 4.95% rate with no local income tax anywhere, sitting alongside the second-highest property tax burden in the country, the highest big-city sales tax in America, and an estate tax that starts at $4 million. This guide covers the whole picture: what the state looks like economically, every rate for 2026, and the payroll rules employers need.
Illinois at a Glance
| Item | 2026 figure |
|---|---|
| Population | Approximately 12.7 million, 6th largest state |
| State capital | Springfield |
| Largest city | Chicago |
| Counties | 102 |
| Local taxing authorities | Over 6,900, more than any other state |
| State GDP | Approximately $1.2 trillion, 5th largest state economy |
| Median household income | $83,390, slightly above the national median |
| Median age | 39.0 |
| Unemployment rate | Approximately 5.1% to 5.8% |
| Median home value | $263,300, below the national median of $332,700 |
| Affordability ratio | 3.2x, the healthiest of the large states |
| Homeownership rate | 67.1% |
| State income tax | 4.95% flat, no brackets |
| Local income tax | None anywhere, Chicago included |
| Sales tax | 6.25% state, 8.83% average combined, 10.25% in Chicago |
| Effective property tax rate | Approximately 2.07%, second highest in the US |
| Estate tax | Yes, $4 million exemption, rates to 16% |
| Inheritance tax | None |
| Retirement income | Fully exempt from state income tax |
| Minimum wage | $15.00/hr statewide, $17.05 Chicago, $15.40 Cook County |
| Paystub required? | Yes, seven required items since January 2025 |
Population and income figures are Census ACS and BEA estimates. Tax figures are 2026 rates from the Illinois Department of Revenue and Department of Employment Security.
Illinois Resources
| Resource | Use it when |
|---|---|
| Illinois Pay Stub Generator | You need a compliant Illinois wage statement |
| Illinois Paycheck Calculator | You want to estimate take-home pay |
The Illinois Economy in 2026
Illinois has roughly $1.2 trillion in gross state product, the fifth largest state economy in the country, and one of the most genuinely diversified. Unlike states built around one or two dominant sectors, Illinois has real depth across finance, manufacturing, agriculture, logistics and healthcare.
What drives it:
- Finance and derivatives. Chicago is a global financial centre and home to the CME Group, the largest futures exchange in the world, plus major asset managers and trading firms.
- Transportation and logistics. Chicago is the largest rail hub in North America and O'Hare is one of the world's busiest airports. Illinois sits at the intersection of rail, road, air and inland waterway freight.
- Manufacturing. Still one of the largest manufacturing states by output, with Deere in Moline, Caterpillar's Illinois operations, and a deep supplier base.
- Agriculture. Illinois leads or nearly leads the country in soybean and corn production.
- Healthcare and higher education. Major systems in Chicago plus the University of Illinois system.
- Corporate headquarters. Around 32 Fortune 500 companies are headquartered in Illinois, among the top five states, with 14 in Chicago alone.
The pressure points. Illinois lost population for most of the 2010s and early 2020s. Net domestic migration remains negative, and unemployment has run somewhat above the national rate. The state's public pension systems are among the worst funded in the country at roughly 43%, which is not an abstraction: it is the primary driver of the property tax burden described below, and it is the single biggest factor in why Illinois taxes look the way they do.
What It Actually Costs to Live in Illinois
Illinois presents the opposite trade-off from Florida, and it is worth understanding precisely.
Housing is cheap. The Illinois median home value is $263,300, meaningfully below the national median of $332,700. Against a median household income of $83,390, that gives an affordability ratio of about 3.2x, close to the traditional 3x guideline and far healthier than California at 7.4x, Florida at 4.8x or Maryland at 4.1x. On the entry price of a home, Illinois is one of the better-value large states in the country.
Holding it is expensive. Illinois's effective property tax rate is approximately 2.07%, the second highest in the nation behind New Jersey and roughly double the national average of 1.1%. On a $300,000 home that is about $6,210 a year, every year, indefinitely.
The two facts point in opposite directions and that is the whole story. Illinois lowers the barrier to buying and raises the cost of owning. For a young buyer with a mortgage, the low purchase price and low income tax often win. For a retiree on a fixed income holding a paid-off house, the annual property tax bill is the dominant number, and it is the reason so much Illinois out-migration is concentrated among older homeowners.
The regional split:
- Chicago and Cook County carry the highest costs across the board: 2.1% property tax with some areas above 3%, 10.25% sales tax, and a cost of living index around 107.8.
- The collar counties (DuPage, Lake, Will, Kane, McHenry) have high incomes and high property taxes, with Naperville's median household income above $155,000.
- Downstate (Rockford, Peoria, Springfield, Champaign) is substantially cheaper on housing but carries its own high effective property tax rates, and median incomes are considerably lower.
The Illinois Flat Income Tax
Illinois taxes individual income at a flat 4.95%. There are no brackets, no phase-ins, and no higher rate for higher earners. The rate has been 4.95% since July 1, 2017.
The flat structure is not a policy preference that could change easily. The Illinois Constitution requires a non-graduated income tax, a provision in place since 1969. A 2020 ballot measure to allow graduated rates was rejected by voters, so moving to brackets would require another constitutional amendment.
No Local Income Tax Anywhere
No Illinois city or county levies an income tax. Not Chicago, not Cook County, nowhere in the state.
This is worth stating plainly because it is unusual in the region. Maryland's counties levy a mandatory piggyback tax of 2.25% to 3.30%. Indiana counties levy their own income tax. Kentucky has local occupational taxes. Missouri has city earnings taxes in Kansas City and St. Louis. Illinois has none of it, so a Chicago paycheck and a downstate paycheck carry exactly the same state tax line.
Retirement Income Is Fully Exempt
Illinois does not tax retirement income at all. Social Security, pensions, 401(k) distributions, IRA withdrawals, and government and military retirement pay are all excluded from Illinois taxable income.
This is one of the most generous retirement income treatments in the country and it stands in sharp contrast to the property tax and estate tax positions below. Illinois is unusually kind to retirees on their income and unusually harsh on their real estate and their estates.
How Withholding Works
Illinois does not use the federal W-4. Employees complete Form IL-W-4, claiming a basic personal allowance plus allowances for dependents and additional allowances for being 65 or older or legally blind. The personal exemption for 2026 is $2,925.
Because the rate is flat, allowances rather than brackets are what move the withholding figure.
Reciprocity
Illinois has reciprocal agreements with Iowa, Kentucky, Michigan and Wisconsin. A resident of those states working in Illinois is not subject to Illinois withholding, using Form IL-W-5-NR.
Note who is absent: Indiana and Missouri. Both border Illinois, both send large numbers of commuters, and neither has reciprocity. Those workers have Illinois tax withheld and claim a credit at home.
Full filing detail is in the Illinois income tax guide.
Illinois Property Tax: The Number That Defines the State
If you understand one thing about Illinois finances, make it this one.
| Component | Figure |
|---|---|
| Effective statewide rate | Approximately 2.07% to 2.08% |
| National ranking | Second highest, behind New Jersey |
| National average | Approximately 1.1% |
| Cook County / Chicago | Approximately 2.1%, some areas above 3% |
| Annual cost on a $300,000 home | Approximately $6,210 |
| Typical Chicago-area suburban bill | $12,000 to $20,000 on an ordinary home |
Why It Is So High
Three structural reasons, and none of them is temporary:
Schools are funded locally. Illinois relies more heavily on local property tax to fund public education than most states, which pushes the burden onto homeowners rather than spreading it through state income tax.
The pension shortfall. Illinois public pension systems are approximately 43% funded, among the worst in the country. Local government pension obligations flow directly into local property tax levies.
Government fragmentation. Illinois has more than 6,900 local taxing authorities, more than any other state in the US. Counties, municipalities, townships, school districts, park districts, library districts, fire protection districts, mosquito abatement districts and more, each with its own levy. A single Illinois property tax bill routinely lists a dozen or more separate taxing bodies.
That last figure is the one most people find hardest to believe and it explains most of the rest.
Exemptions
Illinois offers a General Homestead Exemption for owner-occupied primary residences, a Senior Citizens Homestead Exemption, a Senior Citizens Assessment Freeze for qualifying lower-income seniors, and exemptions for veterans with disabilities. Amounts and administration vary by county, and Cook County operates on its own assessment cycle and rules.
Property tax is not a payroll deduction and does not appear on a paystub, but in Illinois it is frequently a larger annual number than state income tax.
Illinois Sales Tax
| Component | Rate |
|---|---|
| State sales tax | 6.25% |
| Local add-ons | Vary by home rule jurisdiction |
| Average combined rate | Approximately 8.83% |
| Chicago | 10.25%, the highest of any major US city |
Illinois splits the state rate: of the 6.25%, a portion is distributed to local governments automatically, and home rule municipalities may then add their own on top. That layering is why the combined rate varies so widely between neighbouring towns.
Chicago's 10.25% is the headline figure and it is genuinely the highest combined rate among large American cities. For comparison, Clark County (Las Vegas) is 8.375% and most of Florida runs between 7% and 7.5%.
What is treated differently: Illinois taxes qualifying food, drugs and medical appliances at a reduced 1% state rate, though local add-ons may still apply. Chicago layers additional specific taxes on soft drinks, bottled water, restaurant meals in parts of the city, and parking.
Illinois Estate Tax
Illinois has an estate tax and no inheritance tax. The estate tax is a bigger issue than most residents realise.
| Item | 2026 |
|---|---|
| Illinois exemption | $4,000,000 per person |
| Last changed | 2010. No inflation adjustment |
| Portability between spouses | None |
| Rates | Graduated, 0.8% to 16% |
| Federal exemption | $15,000,000 per person |
| Filing deadline | 9 months from date of death |
| Administered by | Illinois Attorney General |
The federal gap is the problem. The federal exemption was raised to $15 million per person and made permanent in July 2025. Illinois has stayed at $4 million since 2010. That leaves an $11 million band in which an estate owes Illinois tax and nothing at all federally.
No portability makes it worse. Under federal law, a surviving spouse can inherit their partner's unused exemption. Illinois does not allow this. A couple with a combined $8 million estate may owe zero federal estate tax and still face a substantial Illinois bill at the second death unless bypass trust planning was done in advance.
Pending legislation: House Bill 2601 in the 2025 session proposed doubling the exemption to $8 million. It has not been enacted, and current law remains $4 million. Check the current position before relying on this.
In the Chicago metro, where a paid-off house, a retirement account and a small business can add up quickly, the $4 million threshold catches considerably more families than the number suggests.
Illinois Payroll Taxes (2026)
Illinois has exactly one state payroll tax, and employees pay none of it.
| Tax | Paid by | 2026 | Wage base |
|---|---|---|---|
| State income tax withholding | Employee | 4.95% flat, per Form IL-W-4 | No cap |
| Local income tax | N/A | None | |
| State disability insurance | N/A | None | |
| Unemployment insurance (SUI) | Employer only | Experienced 0.75% to 7.05%; new employer approx. 3.35% | $14,250 |
SUI is administered by the Illinois Department of Employment Security (IDES) and filed quarterly on Form UI-3/40. Employees contribute nothing, so it must never appear as a deduction on a wage statement.
A caution on the SUI numbers. Third-party sources publish sharply conflicting 2026 Illinois figures, with wage bases quoted from $13,271 to $14,250 and new employer rates from 3.175% to 3.95%. The figures above follow the IDES rate publication. The only number that governs your account is the one on your annual Notice of Contribution Rate from IDES.
Illinois's wage base is roughly double the federal FUTA base of $7,000 and higher than most neighbouring states, so SUI is a larger line in an Illinois payroll budget than employers relocating from elsewhere expect.
Two Agencies, Not One
Illinois splits payroll administration, which surprises employers used to a single department:
- Illinois Department of Revenue (IDOR) for income tax withholding, using Forms IL-941 and IL-501
- Illinois Department of Employment Security (IDES) for unemployment insurance, using Form UI-3/40
Both run through the MyTax Illinois portal. New hires must be reported to the Illinois New Hire Directory within 20 days, with a $500 per-report penalty for failure.
Illinois Secure Choice
Employers above the applicable size threshold that do not offer a qualifying retirement plan must facilitate enrolment in Illinois Secure Choice, the state-run retirement savings program. Employer contributions are not required, but employee deferrals are withheld through payroll and appear as a deduction. Registration thresholds have expanded in phases, so confirm your current obligation.
Federal Payroll Taxes
| Tax | 2026 rate | Wage base |
|---|---|---|
| Social Security (OASDI) | 6.2% each, employee and employer | First $184,500 |
| Medicare | 1.45% each | All wages |
| Additional Medicare | 0.9%, employee only | Over $200,000 single / $250,000 MFJ |
| FUTA | 6.0% gross, 0.6% net after state credit | First $7,000 |
To model a specific salary, use the Illinois paycheck calculator.
Illinois Minimum Wage and Employment Rules
Three Minimum Wages
| Jurisdiction | Standard | Tipped cash wage | Effective |
|---|---|---|---|
| Illinois statewide | $15.00/hr | $9.00/hr | Since January 1, 2025 |
| Cook County (outside Chicago) | $15.40/hr | $9.25/hr | July 1, 2026 |
| Chicago | $17.05/hr | $12.96/hr | July 1, 2026 |
| Chicago city contracts | $18.50/hr | $12.96/hr | July 1, 2026 |
The statewide rate reached $15.00 under the schedule set in 2019 and has no automatic inflation adjustment. Chicago and Cook County adjust annually on July 1.
Two rules employers miss:
- Chicago's two-hour rule. An employee who works at least two hours in any two-week period inside Chicago city limits is entitled to the Chicago rate for those hours. This catches delivery drivers, field technicians and anyone crossing the city line.
- Cook County opt-outs. More than 80% of Cook County municipalities have opted out of the county ordinance. In an opted-out municipality the state rate applies. Confirm the specific municipality before applying $15.40.
Tipped employees may be paid 60% of the applicable minimum statewide, with tips making up the difference. In 2026 the Chicago City Council halted the tip credit phase-out it began in 2023, freezing the Chicago tipped wage at $12.96 until July 1, 2028. A great deal of published content still describes Chicago as mid-phase-out; that is no longer the position.
Overtime and Rest
Illinois follows the federal standard, 1.5x after 40 hours in a workweek, with no daily overtime.
The One Day Rest in Seven Act (ODRISA) is stricter than most states: employees are entitled to at least 24 consecutive hours of rest in every consecutive seven-day period, and to a 20-minute meal break for every 7.5 continuous hours worked, beginning no later than five hours into the shift.
Paid Leave
The Paid Leave for All Workers Act has since January 2024 entitled most Illinois employees to at least 40 hours of paid leave per 12-month period, usable for any reason, accrued at one hour per 40 hours worked. Chicago runs its own more generous ordinance covering both paid leave and paid sick and safe leave.
Final Pay and Records
Final compensation is due by the next regularly scheduled payday, whether the employee quit or was terminated. There is no accelerated deadline and no waiting time penalty. Payroll records must be kept for three years.
Illinois Pay Stub Requirements
Illinois changed its wage statement law substantially on January 1, 2025. Public Act 103-0953 amended the Illinois Wage Payment and Collection Act to require seven specific items on every paystub: hours worked, rate of pay, overtime pay, overtime hours worked, gross wages earned, wage deductions, and total wages and deductions year to date. The available paid leave balance must also be provided, on the statement or alongside it.
The Illinois-specific trap: hours worked is required for salaried exempt employees too. Unlike California and Maryland, Illinois has no classification-based carve-out from the hours field.
The law also created record-keeping obligations: three-year retention regardless of whether the employee leaves, copies furnished within 21 calendar days of request, a cap of two requests per employee per 12 months, and a documented offer of the previous year's statements to departing employees where paystubs are delivered electronically only.
Penalties: up to $500 per violation, on top of existing IWPCA damages and attorney fees.
Anything written about Illinois wage statements before 2025 describes a legal position that no longer exists. Full detail and the generator are on the Illinois pay stub generator page.
Largest Illinois Cities
| City | Approximate population | Median household income |
|---|---|---|
| Chicago | 2,711,000 | $77,902 |
| Aurora | 180,000 | $93,633 |
| Naperville | 151,000 | $155,105 |
| Joliet | 150,000 | $92,201 |
| Rockford | 148,000 | $54,752 |
| Elgin | 115,000 | $90,282 |
| Springfield | 113,000 | $66,064 |
| Peoria | 112,000 | $59,410 |
| Champaign | 90,000 | $56,118 |
The income spread is the thing to notice. Naperville's median household income is nearly three times Rockford's, and both sit under the same flat 4.95% state tax with no local income tax on top. Illinois's regional variation shows up in property tax rates and sales tax rates, not in income tax.
Disclaimer
This page is general information, not legal, tax, or accounting advice. Rates and rules change, and correct treatment depends on your circumstances. Verify current figures with the Illinois Department of Revenue, the Illinois Department of Employment Security, the Illinois Department of Labor, your county assessor, and the IRS, or consult a qualified professional.
Paystubs created through OnlinePayStub should reflect genuine compensation and accurate payroll information. The service is not intended to fabricate employment, inflate earnings, or create misleading financial documents.
Last verified: [date] Sources: Illinois Department of Revenue, Illinois Department of Employment Security, Illinois Department of Labor, Illinois Attorney General, Public Act 103-0953, City of Chicago, Cook County, US Census Bureau, Bureau of Economic Analysis, IRS, SSA
Frequently Asked Questions
What is the Illinois income tax rate in 2026?
A flat 4.95% on all individual income, in effect since July 2017. There are no brackets. The Illinois Constitution requires a non-graduated rate, and a 2020 ballot measure to allow brackets was rejected by voters.
Does Illinois have a local income tax?
No. No Illinois city or county levies an income tax, Chicago included. This differs from Indiana, Kentucky, Maryland and Missouri, all of which layer local income taxes on top of the state rate.
Does Illinois tax retirement income?
No. Social Security, pensions, 401(k) and IRA distributions, and government and military retirement pay are all fully exempt from Illinois income tax.
Why are Illinois property taxes so high?
Three structural reasons: heavy reliance on local property tax to fund schools, public pension systems funded at roughly 43%, and more than 6,900 local taxing authorities, more than any other state. The effective rate of about 2.07% is second highest in the country.
How much is property tax on a $300,000 home in Illinois?
Approximately $6,210 a year at the statewide effective rate. Cook County and some suburban areas run higher, with ordinary suburban bills commonly falling between $12,000 and $20,000 on higher-value homes.
What is the sales tax rate in Illinois?
6.25% at the state level, averaging about 8.83% combined. Chicago's 10.25% is the highest combined rate of any major US city. Qualifying food and drugs are taxed at a reduced 1% state rate.
Does Illinois have an estate tax?
Yes, with a $4 million exemption and rates from 0.8% to 16%. There is no inheritance tax. The exemption has not changed since 2010, is not indexed to inflation, and is not portable between spouses, while the federal exemption is $15 million.
What is the minimum wage in Illinois in 2026?
$15.00 per hour statewide. Chicago is $17.05 and Cook County outside Chicago is $15.40, both from July 1, 2026. More than 80% of Cook County municipalities have opted out of the county ordinance and follow the state rate.
Does Illinois require employers to provide pay stubs?
Yes. Since January 1, 2025, seven specific items are required every pay period, plus the available paid leave balance. Hours worked is required even for salaried exempt employees. The penalty is up to $500 per violation.
What payroll taxes do Illinois employees pay?
Federal income tax, Social Security and Medicare, plus the flat 4.95% Illinois income tax. There is no local income tax, no state disability insurance, and no employee unemployment contribution.
Is Illinois cheaper than a state with no income tax?
It depends entirely on whether you own property. Illinois homes cost less than the national median and the flat 4.95% income tax is moderate, but the 2.07% property tax is nearly double the national average. Renters and early-career buyers often come out ahead; long-term homeowners and retirees on fixed incomes frequently do not.
Which agency handles Illinois payroll and business taxes?
The Illinois Department of Revenue handles income tax withholding and sales tax. The Illinois Department of Employment Security handles unemployment insurance. The Illinois Department of Labor handles wage, hour and pay statement matters. Estate tax is administered by the Illinois Attorney General.