State retirement tax · Illinois
Retirement tax rules for Illinois residents (2026 guide)
Illinois has a flat 4.95% income tax but subtracts virtually all retirement income from it — Social Security, pensions, 401(k) and IRA withdrawals, even Roth conversions. Retirees mostly pay tax on investment income, and on property taxes that are among the highest in the country, which Illinois offsets with senior exemptions and an assessment freeze.
By Mindaugas Laucius · Last reviewed October 21, 2026
Rate on retirement income
~0%*
Taxes Social Security?
No
Approx. tax on $90k retirement income
$0
Pension carve-outs
Full
Quick figures: a single filer with $90,000 of income, $30,000 of it Social Security.
The Line 5 subtraction
On Form IL-1040, Line 5 subtracts qualified retirement income: Social Security, government and private pensions, 401(k), 403(b) and 457 distributions, IRA and SEP distributions including amounts converted to a Roth, and military and railroad retirement. There's no age requirement or dollar limit.
The 4.95% still applies to wages, interest, dividends and capital gains from taxable accounts, rental income and non-qualified deferred compensation.
Property-tax relief for seniors
Under current law the senior citizens homestead exemption reduces a 65+ owner's equalized assessed value by up to $8,000 in Cook County and its neighboring counties and $5,000 elsewhere, and the Senior Citizens Assessment Freeze holds the assessed value for 65+ households with income up to $65,000. Bills to raise those limits were pending in 2026 — check with your county assessor before you count on a figure.
Worked examples
A pension-and-IRA retiree
- $50,000 pension + $40,000 of IRA withdrawals + $30,000 of Social Security — all subtracted on Line 5.
Illinois tax: $0.
Investment income
- $25,000 of dividends and capital gains × 4.95% = $1,237.50.
$1,237.50 — the part of a retiree's income Illinois does tax.
A Roth conversion
- $50,000 converted from a traditional IRA.
Illinois tax: $0, since conversions are subtracted too.
Run your own numbers — pick Illinois in the calculator’s Taxes tab for a year-by-year estimate. Or compare all 50 states and DC.
Thinking about a move? The free state-to-state retirement tax comparison puts Illinois next to any other state on your own income.
Illinois questions
Does Illinois tax a 401(k) withdrawal before 59½?
Qualified-plan distributions are subtracted regardless of age, but early-withdrawal penalties still apply federally. Check Pub-120 for the plan types that qualify.
Are Roth conversions really exempt in Illinois?
Yes. Amounts converted from a traditional IRA to a Roth are included in the Line 5 subtraction.
Where do I apply for the senior exemption and freeze?
With your county assessor; the freeze requires an annual application with proof of income.