Illinois Paycheck Calculator Guide

Illinois Income Tax: The 4.95% Flat Rate Explained

Illinois is one of only a handful of states using a flat (single-rate) income tax structure. The current 4.95% rate was enacted in 2017 (up from 3.75%). Unlike California or New York's progressive brackets, calculating your Illinois state tax is simple:

Illinois State Tax = Taxable Income × 4.95%

Note: Illinois Taxable Income

For most W-2 employees, Illinois taxable income = federal adjusted gross income (AGI) with a few modifications. Traditional 401(k) contributions reduce your Illinois taxable income, just as they reduce federal taxable income. Illinois does not have a state standard deduction equivalent to the federal one.

Illinois Personal Exemption:

- $2,425 per taxpayer (single filer)

- $4,850 for married filing jointly

- $2,425 for each dependent

This small exemption is the only income reduction available on the IL return (other than specific deductions). The exemption is much smaller than the federal standard deduction.

Illinois Take-Home Pay by Salary (2026)

Chicago: Does the City Add More Taxes?

Chicago does not impose a local income tax. However, Cook County and Chicago do impose several other taxes that affect residents:

Chicago Taxes (not income-based):

- Chicago sales tax: 10.25% (one of the highest in the US)

- Cook County property tax: average effective 2.19% (highest in the nation for major counties)

- Chicago "cloud tax" on digital streaming services: 9%

- Restaurant tax: 10.75% in the city

- Rideshare tax: $1.25 per trip (city), $0.50 per trip (Cook County)

Property Tax Reality in Chicago:

With an effective property tax rate of 2.19%, a $350,000 home in Chicago generates $7,665/year in property taxes. Compare this to Houston, TX at 2.23% but with typically lower assessed values, or Los Angeles at 1.16% with very high assessed values due to Prop 13 lag.

For Chicago renters, these property taxes are embedded in rental prices — one reason Chicago rents are somewhat high relative to median income.

Illinois vs. No-Income-Tax States

The 4.95% flat tax is moderate by national standards but still represents a real cost:

| Salary | IL Net | TX Net | IL Cost vs TX |

|--------|--------|--------|----------------|

| $50,000 | $39,862 | $42,213 | $2,351/yr less |

| $75,000 | $57,609 | $61,147 | $3,538/yr less |

| $100,000 | $73,592 | $78,295 | $4,703/yr less |

| $150,000 | $105,427 | $110,284 | $4,857/yr less |

The Illinois-Texas gap grows slowly — the flat 4.95% scales linearly with income while Texas has no cap. At $200,000, the annual difference is approximately $9,900

Tax Planning Strategies for Illinois Workers

At 4.95% flat, every pre-tax dollar you save reduces state taxes by exactly 4.95 cents — plus the federal savings at your bracket.

Combined Marginal Rate in Illinois:

At $75,000 salary (22% federal bracket): 22% federal + 4.95% IL = 26.95% combined marginal rate

This means a $10,000 traditional 401(k) contribution saves:

- Federal: $10,000 × 22% = $2,200

- Illinois: $10,000 × 4.95% = $495

- Combined savings: $2,695/year

- Your net cost to save $10,000 for retirement: only $7,305

Illinois Does Not Tax Retirement Income:

This is one of Illinois's most worker-friendly tax features. Social Security benefits, pension income, and distributions from 401(k), IRA, and other qualified retirement accounts are exempt from Illinois income tax. This makes Illinois a better retirement destination than many states with progressive taxes on retirement income.

Frequently Asked Questions