Illinois Income
Tax Rates & Rules

Illinois uses a flat 4.95 percent individual income tax rate in 2026. The state starts with federal adjusted gross income, applies Illinois additions and subtractions, subtracts eligible exemptions then applies the 4.95 percent rate to Illinois net income. Residents, part-year residents and nonresidents use different sourcing rules.

Illinois Uses a Flat 4.95 Percent Income Tax Rate

Illinois does not use graduated individual income tax brackets. The 2026 individual rate is 4.95 percent, which is also the rate used in the 2026 employer withholding tables.

A flat rate does not mean that 4.95 percent of every dollar of gross income becomes final tax. Illinois first determines base income, then subtracts the allowed exemption amount to arrive at net income. Credits and withholding are applied later in the return process.

How Illinois Taxable Income Is Calculated

Illinois begins with federal adjusted gross income from the federal return. State additions and subtractions then produce Illinois base income. Exemptions reduce base income to Illinois net income. The 4.95 percent rate is then applied to that net amount.

Illinois does not simply import the federal standard deduction into its state calculation. The state uses its own additions, subtractions and exemption structure, so federal taxable income and Illinois net income can differ materially.

The 2026 Illinois Personal Exemption Is $2,925

The Illinois personal exemption amount is $2,925 per exemption for tax year 2026. Additional $1,000 exemptions can apply for a taxpayer or spouse who is age 65 or older or legally blind.

The standard exemption is not available when federal adjusted gross income exceeds $250,000 for single, head of household, married filing separately or qualifying surviving spouse returns. The threshold is $500,000 for married filing jointly returns.

Illinois Does Not Tax Qualifying Social Security and Retirement Income

Illinois allows a subtraction for federally taxed Social Security benefits and many types of retirement income that are included in federal adjusted gross income. This can include qualified employee benefit plans, many 401(k) distributions, IRAs, government retirement plans and Railroad Retirement benefits.

The subtraction is important because retirement income that appears on the federal return can produce little or no Illinois income tax when it qualifies for the state subtraction. Taxpayers should use the Illinois instructions to confirm that a payment fits an allowed retirement category.

Who Must File an Illinois Income Tax Return?

An Illinois resident generally must file Form IL-1040 if a federal income tax return is required or if Illinois base income exceeds the Illinois exemption allowance even when no federal return is required. Nonresidents and part-year residents can also have Illinois filing obligations.

A nonresident generally files Form IL-1040 with Schedule NR when Illinois-source income creates a tax liability or when a refund of Illinois tax withheld in error is requested. Part-year residents use Schedule NR to separate income received while an Illinois resident from Illinois-source income received while a nonresident.

Illinois Residency Determines How Much Income the State Can Tax

A full-year Illinois resident is generally taxed on Illinois base income from all sources, subject to state subtractions and credits. A part-year resident is generally taxed on income received while an Illinois resident plus Illinois-source income received while a nonresident.

A nonresident is taxed only on Illinois-source income. Business income, Illinois property income and compensation for services can require sourcing analysis, which is why a change in residence or work location can affect the return even when total annual income stays the same.

Illinois Has Reciprocity With Four Neighboring States

Illinois has wage-tax reciprocity with Iowa, Kentucky, Michigan and Wisconsin. A resident of one of those states who works in Illinois is generally not subject to Illinois income tax on wages, salaries, tips and commissions covered by the agreement.

The reciprocity rule applies to employee compensation, not every type of Illinois income. Business income, lottery winnings, rental income or other Illinois-source income can still create Illinois tax and filing obligations for a reciprocal-state resident.

Remote Work Can Change Illinois Sourcing and Withholding

Illinois looks at where employee services are performed and whether the services are localized in Illinois. If all services are performed in Illinois, compensation is generally Illinois compensation. If a nonresident employee works in Illinois for limited days, the state also has a 30-working-day rule for certain nonlocalized employment arrangements.

A nonresident employee whose services are not otherwise localized in Illinois can become subject to Illinois withholding on an allocated share of wages after more than 30 working days of significant nonincidental service in Illinois. Form IL-W-6 can be used in certain cases to document days worked in Illinois.

Illinois Withholding Uses Form IL-W-4

Employees use Form IL-W-4 to provide Illinois withholding allowances. Employers calculate withholding using the 2026 IL-700-T tables and the 4.95 percent rate after applying the allowable withholding exemption amount.

For a paycheck-level estimate using 2026 payroll inputs, see the Illinois paycheck calculator. Annual Illinois income tax can differ from paycheck withholding because the return includes other income, subtractions, exemptions and credits.

Estimated Payments May Be Required When Withholding Is Too Low

Illinois generally requires individual estimated income tax payments when a taxpayer reasonably expects the year's liability to exceed $1,000 after subtracting Illinois withholding, pass-through withholding and applicable credits.

Estimated payments are common for self-employed taxpayers, investors or residents whose income is not fully covered by Illinois withholding. Form IL-1040-ES is used for individual estimated payments.

Illinois Residents May Claim Credit for Tax Paid to Another State

An Illinois resident or part-year resident can qualify for a credit when the same income is taxed by Illinois and another state. Schedule CR is used to calculate the credit.

The credit does not apply the same way to reciprocal-state wages because Iowa, Kentucky, Michigan and Wisconsin generally do not tax qualifying employee compensation earned by an Illinois resident under the reciprocity agreements. If tax was withheld by mistake, the taxpayer normally claims a refund from that state rather than using the amount as an Illinois credit.

Common Illinois Additions, Subtractions and Credits

Illinois taxable income can differ from federal income because the state has its own adjustment rules. Common subtractions can include qualifying Social Security and retirement income plus certain Illinois 529 plan contributions. Illinois also offers credits that can reduce final tax when eligibility requirements are met.

• Credit for income tax paid to another state through Schedule CR when the same income is taxed twice.
• Illinois Property Tax Credit for eligible taxpayers who meet the state requirements.
• Illinois Earned Income Tax Credit and Child Tax Credit for qualifying taxpayers.
• Education expense credits or other state credits when the taxpayer satisfies the current-year rules.

Pay Stubs Help Reconcile Illinois Withholding but Do Not Replace Form IL-1040

A pay stub can show current Illinois withholding and YTD tax paid through payroll, but the annual income tax return determines final liability. Taxpayers should reconcile payroll records with Forms W-2, 1099 and other year-end documents before filing.

Employers who need a clear employee-facing payroll record can use the Illinois pay stub generator after wages and deductions are verified. For broader lawful payroll documentation, paystub maker tools should be used only with genuine compensation data.