Illinois retirement income tax (2026)

By the Deorbit Plan editorial team, a Berrydyne program · Last reviewed November 2026 · Topic: Taxes in retirement

Income tax: Flat 4.95%
Social Security: Exempt
Retirement exclusion: All IRA/pension income, any age
Standard deduction: None
Personal exemption: $5,850 joint · $2,925 single
Capital gains: Taxed as ordinary income

How Illinois taxes retirement income

Illinois taxes income at one flat rate, 4.95%, whatever the amount and filing status^[1].

The simulator applies no Illinois standard deduction; it subtracts personal exemptions of $5,850 on a joint return ($2,925 single).

Social Security benefits are exempt from Illinois income tax: none of the benefit enters the state base, as in 22 of the 24 states covered here that tax income.

All IRA, 401(k) and pension distributions are excluded from the Illinois base at any age, so for most retirees only wages and investment income are taxed.

Long-term capital gains and qualified dividends are taxed as ordinary income, at the same rates.

Put together, the example couple below owes $0 in Illinois, the lowest bill among the 24 states covered here that tax income, shared with 7 other states.

2026 rate

One rate, 4.95%, applies to all taxable income for every filing status; there are no brackets.

Worked example

A retired couple, both 67, filing jointly, with $48,000 of Social Security, $40,000 of IRA withdrawals and a $20,000 pension. The figures are computed when the page is built, by the same state-tax function the simulator runs.

Married couple, both 67, in Illinois
IRA / 401(k) withdrawals + pension	$60,000
Social Security in the state base ($48,000 received, $40,000 federally taxable)	$0
Less retirement exclusion	−$60,000
Less standard deduction	−$0
Less personal exemptions	−$5,850
Taxable in Illinois	$0
Illinois income tax	$0
Share of $108,000 gross income	0.00%

The couple’s next $1,000 of IRA withdrawals would add $0 of Illinois tax.

A single retiree, 67, with half those amounts ($24,000 of Social Security, $20,000 of IRA withdrawals, a $10,000 pension) owes $0, 0.00% of gross income.

Illinois state tax calculator

Filing statusAge (both spouses)Social Security benefits for the yearIRA / 401(k) withdrawalsPension or annuity incomeWages

Illinois income tax: $0 (0.00% of $108,000 gross income).
Taxable in Illinois: $0 (after $60,000 of retirement exclusion and $5,850 of deductions and exemptions).
The next $1,000 of IRA withdrawals would add $0.

Runs the same state-tax function as the Deorbit Plan simulator, with withdrawals and pension split evenly between spouses on a joint return. State tax only; federal tax and any local income tax are not included.

As IRA withdrawals rise

The same couple, with Social Security and the pension unchanged, taking more from their IRAs (a larger withdrawal, a required minimum distribution or a Roth conversion all count as distributions here):

Illinois tax for the example couple at higher IRA withdrawals
IRA withdrawals	Illinois tax	Share of gross income	Next $1,000 adds
$0	$0	0.00%	$0
$20,000	$0	0.00%	$0
$40,000	$0	0.00%	$0
$80,000	$0	0.00%	$0
$120,000	$0	0.00%	$0
$200,000	$0	0.00%	$0

Neighbouring states

The example couple’s state tax in Illinois and in the neighbouring states covered here, same income and ages:

Example couple’s state income tax, 2026
State	Income tax	Social Security	Couple’s tax	Difference
Illinois	Flat 4.95%	Exempt	$0	n/a
Wisconsin	3.5%–7.65%	Exempt	$0	Same
Indiana	Flat 2.95%	Exempt	$1,711	+$1,711
Kentucky	Flat 3.5%	Exempt	$0	Same
Missouri	2%–4.7%	Exempt	$1,131	+$1,131

Against Illinois, the couple would pay more in Indiana (+$1,711), Missouri (+$1,131); the same in Wisconsin, Kentucky. With $200,000 of IRA withdrawals instead of $40,000, they would owe $0 in Illinois, against Wisconsin ($7,182), Indiana ($6,431), Kentucky ($5,287), Missouri ($8,651).

What this page leaves out

What the simulator does and does not handle for Illinois, item by item^[1]:

Flat 4.95%.
$2,925/person exemption (2026; its $500k-AGI disallowance ignored).
Social Security exempt.
ALL federally qualified retirement income (IRA, 401(k) and pension distributions) is subtracted regardless of age.
Gains outside retirement accounts taxed as ordinary income.

In every state the simulator also leaves out credits, itemized deductions, deductions that phase out with income, local income taxes, surtaxes and any deduction for federal tax paid. It holds state amounts fixed and does not index them for inflation.

See it over a full plan

Load the demo plan with Illinois as the state of residence and see the state tax line year by year, alongside federal tax, RMDs and Roth conversions. Open it in the simulator →

If you already have a saved plan, the link only takes you to the Household panel, where the state is set; your plan is not changed.

This page shows how the rules work. It is not financial, tax or investment advice. State law has details these pages leave out, so check the state’s own instructions or ask a tax professional before you act. See the disclaimer.

Sources

Verified November 11, 2026. The full verification record for this entry is in the sources ledger, with every other figure the simulator uses on the sources page.