Illinois Paycheck Calculator Guide

Illinois Income Tax: The 4.95% Flat Rate Explained

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

Illinois State Tax = Taxable Income × 4.95%

What "Taxable Income" Means for Illinois

For most W-2 employees, Illinois taxable income equals 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 an equivalent to the federal standard deduction — a key difference that surprises many workers.

Illinois Personal Exemption:

- $2,425 per taxpayer (single filer)

- $4,850 for married filing jointly

- $2,425 for each qualifying dependent

This small exemption is the primary income reduction available on the Illinois return (beyond specific deductions). It's much smaller than the federal $15,000 standard deduction, which is why Illinois workers typically have higher taxable income relative to federal taxable income.

Illinois Take-Home Pay by Salary (2026)

Chicago: Does the City Add More Taxes?

Chicago does not impose a local income tax — a meaningful relief compared to New York City's 3.078%–3.876% city surcharge. However, Cook County and Chicago do impose several other taxes that affect residents significantly:

Chicago Taxes (not income-based):

- Chicago sales tax: 10.25% — one of the highest combined rates 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 within Chicago: 10.75%

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

The Property Tax Reality in Chicago

At a 2.19% effective rate, a $350,000 home in Chicago generates approximately $7,665/year in property taxes ($639/month). Compare this to Houston, TX (~2.0–2.3% but often lower assessed values), or Los Angeles at ~1.16% (with Prop 13 protection for long-term owners).

For Chicago renters, these property taxes are embedded in rental prices — one reason Chicago rents sit higher relative to median income than the state income tax picture alone would suggest.

Illinois vs. No-Income-Tax States

The 4.95% flat rate is moderate by national standards — significantly less than California's 9.3% or New York's 6.33%–6.85% — but it represents a real annual cost compared to Texas or Florida:

| 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 gradually — the flat 4.95% scales linearly with income while Texas has none. At $200,000, the annual income tax difference is approximately $9,900.

Tax Planning Strategies for Illinois Workers

At 4.95% flat, every pre-tax dollar you contribute to a retirement account saves you exactly 4.95 cents in Illinois state tax — plus your federal savings at your bracket.

Combined Marginal Rate in Illinois:

At $75,000 (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

- Net cost to you to save $10,000 for retirement: only $7,305

Illinois Does Not Tax Retirement Income — A Major Feature

This is one of Illinois's most worker-friendly provisions. Social Security benefits, pension income, and distributions from 401(k), IRA, and other qualified retirement plans are exempt from Illinois income tax. This makes Illinois a considerably better retirement state than many would assume given the flat income tax. Retirees who build retirement savings in Illinois and then retire there pay no state tax on what they draw down.

Frequently Asked Questions