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Illinois State Taxes: What You’ll Pay in 2025

AARP

Published December 20, 2024

Illinois has some of the highest average property and sales tax rates in the country. The state uses a flat income tax rate but doesn’t tax retirement income or Social Security.

The big picture:

Income tax: 4.95 percent Illinois has a flat income tax rate of 4.95 percent.

Property tax: 1.95 percent of a home’s assessed value (average) Real estate taxes vary depending on where you live, but the average property tax rate in Illinois was 1.95 percent of a home’s assessed value in 2021, according to the Tax Foundation. The Chicagoland area, including Lake, DuPage and Kendall counties, pays some of the highest property taxes statewide.

Sales tax: 8.85 percent The state levies a 6.25 percent sales tax statewide, but municipalities can add up to 4.75 percent in local sales tax. The combined average sales tax rate is 8.85 percent, according to 2024 Tax Foundation data.

How is income taxed in Illinois?

Illinois’ flat income tax rate means that every resident, regardless of income level, pays the same individual income tax rate of 4.95 percent.

Nonresidents who work in Illinois also must pay income tax to the state, unless they live in Wisconsin, Iowa, Kentucky or Michigan. These states have reciprocal agreements with Illinois, so you only pay income tax to the state where you primarily live, not the state where you work.

Unemployment compensation is taxed in Illinois as part of your adjusted gross income, whether you’re a resident or were employed in the state. The only exception is railroad unemployment.

More information is on the Illinois Department of Revenue’s website.

Watch the video below to learn how to identify your 2024 federal income tax brackets.

Are pensions or retirement income taxed?

Illinois doesn’t tax pension distributions or retirement plan income, including from IRAs, 401(k) plans and government retirement plans.

AARP's Retirement Calculator can help you determine if you are saving enough to retire when — and how — you want.

What about investment income?

Investment income is taxed at 4.95 percent — the same tax rate as other income.

Does Illinois tax Social Security benefits?

No, but you may pay federal taxes on a portion of your Social Security benefits, depending on your "provisional income." In most cases, provisional income is equal to the combined total of half your Social Security benefits, your adjusted gross income (not including any Social Security benefits) and any tax-exempt interest for the year.

Up to 50 percent of your benefits will be taxed if your provisional income is $25,001 to $34,000--or if you file jointly and your provisional income is $32,001 to $44,000.

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Up to 85 percent of your benefits will be taxed if your provisional income is more than $34,000 individually or more than $44,000 as a couple.

AARP's Social Security Calculator can assist you in determining when to claim and how to maximize your Social Security benefits.

How is property taxed in Illinois?

There are multiple factors used to determine your property tax bill in Illinois, including the assessed value of your home and your local tax rate.

At 1.95 percent, the average property tax rate in Illinois is the second highest in the country, according to the Tax Foundation.

Property taxes vary by municipality, but northeastern Illinois — including Chicago — has significantly higher property taxes than the rest of the state. Lake County has the highest median property taxes paid at $8,609, according to 2022 data from the Tax Foundation, while Pulaski County near the Kentucky border has the lowest at $694.

Most homeowners qualify for the general homestead exemption, which lowers your home’s equalized assessed value, or its partial value used when calculating your property taxes. Other exemptions include the senior citizens homestead exemption — more information is available below.

Contact your county assessor or go to the Illinois Department of Revenue’s website for more information on property tax relief.

Illinois does not tax personal property, such as boats, cars and RVs.

What about sales and other taxes?

Sales tax: Consumer goods and services are taxed at 6.25 percent statewide. Municipalities also may levy a local sales tax, which can be no more than 4.75 percent. The average combined sales tax rate in Illinois is 8.85 percent, according to the Tax Foundation. In Chicago, the combined sales tax is 10.25 percent.

Grocery tax: Groceries, medicine and hygiene products are taxed at 1 percent throughout the state through 2025.

Gas and diesel: Illinois residents pay state sales tax (6.25 percent) in addition to a motor fuel tax on gas and diesel. Some counties, including DuPage, McHenry and Will, also tack on a local motor fuel tax. The statewide motor fuel tax is 67 cents per gallon for gasoline and about 74 cents per gallon for diesel through June 30, 2024.

Alcohol: Consumers pay state sales and local tax on beer, wine and liquor. Excise taxes are levied at the state and local levels. These taxes are paid by the vendor, but some or all may be included in the retail price. The state excise tax on liquor with more than 20 percent alcohol is $8.55 per gallon, while liquor with less alcohol is taxed at $1.39 per gallon, as is wine. Beer has a 23-cents-per-gallon excise tax. Chicago tacks on a 29-cents-per-gallon tax on beer and levies 36 cents to $2.68 per gallon of liquor, depending on the percentage of alcohol.

Hotels: Taxes on hotel operators are levied at the state and local levels. These taxes are paid by the hotels, but are included in the retail price. The state levies a 6 percent tax on 94 percent of a hotel’s total revenue. Other municipalities, including Chicago, may levy additional hotel/motel use taxes.

Lottery: Illinois withholds state taxes (4.95 percent) on lottery winnings of at least $1,000. The state lottery also is required to withhold federal taxes (24 percent) on winnings of $5,000 or more. Additional taxes will be withheld if you do not provide your Social Security number or if you are considered a nonresident alien.

Will I or my heirs have to pay inheritance and estate tax in Illinois?

Illinois has no state tax on inheritance, but you are required to file on all estates of $4 million or more. While forms are due to the Illinois Attorney General’s Office, the taxes must be paid to the Illinois State Treasurer no later than nine months after one’s death.

Specific estate tax rates beyond the exclusion are available at the Illinois Attorney General’s website.

Are there any tax breaks for older Illinois residents?

Illinois residents 65 or older may qualify for the senior citizen's homestead exemption, which reduces a home’s equalized assessed value (partial value used to determine property taxes) by $8,000 if you’re a resident of Cook, Lake, Kane, Will, McHenry and DuPage counties.

The reduction is $5,000 in every other county.

Those 65 and older whose household income is no more than $65,000 can apply to freeze the equalized assessed value of their home for one year.

The state offers a deferral program that lets residents who qualify postpone their property tax payment. Qualifications include being 65 and older and having a household income of no more than $65,000.

Contact your county assessor for information about exemptions and your county treasurer for information about deferrals.

Are military benefits taxed in Illinois?

Most military pay, including retired pay, is not taxed in Illinois. There are a few exceptions, including military pay you received as a civilian.

Nonresidents — those who only live in the state because of military assignment — are not required to report military pay to Illinois. Under the Veterans Benefits and Transition Act of 2018, military spouses may use the same residence as their partner when filing returns, regardless of where they live.

More information about how to file your return is available in the Department of Revenue’s Publication 102.

What is the deadline for filing Illinois state taxes in 2025?

The deadline for filing Illinois state and federal tax returns is Tuesday, April 15, 2025. For help estimating your annual income taxes, use AARP's Tax Calculator.

Illinois offers a six-month filing extension automatically, but you still must pay any taxes owed by April 15, unless you file a Form IL-505-I. Receiving a federal extension for more than six months is the only way you’ll receive a longer extension.

Editor's note: This article was originally published on Feb. 3, 2023. It has been updated to reflect new information.

Elissa Chudwin is a former writer for aarp.org who covered federal and state policy and wrote the podcast Today’s Tips from AARP. She previously worked as a digital producer for The Press Democrat in Santa Rosa, California, and as an editor for Advocate magazines in Dallas.