Illinois State Tax Guide: What You’ll Pay in 2023

En español | 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. 

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

• Property tax: 2.08 percent of a home’s assessed value (average) 
  Real estate taxes vary depending where you live, but the average property tax rate in Illinois was 2.08 percent of a home’s assessed value in 2021, according to the Tax Foundation. The Chicagoland area, including Cook, DuPage, Lake and Will counties, pays some of the highest property taxes statewide.

• Sales tax: 8.82 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 8.82, according to 2023 Tax Foundation data.

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 2022 federal income tax brackets.

Illinois doesn’t tax pension distributions or retirement plan income, including 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.

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

No, but you may pay federal taxes on a portion of your Social Security benefits, depending on your income. Up to 50 percent of your benefits will be taxed if you file an individual tax return and make $25,000 to $34,000 in total income — or if you file jointly and as a couple make $32,000 to $44,000 in total income. Up to 85 percent of your benefits will be taxed by the federal government if your total income is more than $34,000 individually or $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.

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 2.08 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 $8,040 according to 2021 data from the Tax Foundation, while Pulaski County near the Kentucky border has the lowest at $647. 

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 Department of Revenue’s website for more information on property tax relief.

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

• 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 8.82 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 in Illinois.

• Gas and diesel: Illinois residents pay state sales tax (6.25 percent) in addition to a motor fuel tax on gas and diesel. The gas tax increased from 42.3 cents per gallon to 45.4 cents per gallon in July 2023 because of inflation.
   

• Alcohol: Consumers pay state sales and local tax on beer, wine and liquor. Excise taxes are levied at the state and local level. 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.

• 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. 

Illinois has no state tax on inheritance, but estates are taxed 0.8 percent to 16 percent after a $4 million exclusion. 

Estate taxes must be paid to the Illinois State Treasurer no later than nine months after one’s death. Even if no tax is due, filing a return is required on all estates of $4 million and above.

More information and an estate tax calculator is available at the Illinois Attorney General’s website. 

Illinois residents 65 or older may qualify for the senior citizens 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 or 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.

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.

The deadline for filing Illinois state and federal tax returns is April 18, 2023. 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 18, 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. 



The guide, first published on Feb. 7, 2023, was updated Sept. 15, 2023, with new information about property taxes in Illinois.

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Elissa Chudwin is a contributing writer who covers federal and state policy. She previously worked as a digital producer for The Press Democrat in Santa Rosa, California, and an editor for Advocate magazines in Dallas, Texas.