Retiring in Illinois: how your income is taxed
Illinois is very tax-friendly for retirees. On a typical retirement income it ranks tied for #1 of 51 with 18 other states for the lowest state income tax.
The rules in Illinois
- Social Security: Illinois subtracts all Social Security benefits included in federal AGI, at any income level.
- Pensions: Distributions from qualified employer plans and all government pensions (including military) are fully subtracted at any age. Nonqualified plan income is taxable.
- 401(k), 403(b) and IRA withdrawals: 401(k), IRA, SEP and self-employed plan withdrawals are fully exempt, including early distributions and Roth conversions.
- At 65 and older: Each filer 65 or older adds $1,000 to the exemption allowance, unless federal AGI is over $250,000 ($500,000 joint).
Calculate your Illinois retirement taxes
State income tax in Illinois: $0 a year
In Illinois, the 401(k)/IRA amount counts as IRA withdrawals, which don't qualify for the pension exclusion. Enter withdrawals from employer plans such as a 401(k) or 403(b) as pension.
In Illinois you'd pay about $0 in state income tax and $4,336 in federal income tax on $70,000 of retirement income, keeping $65,664 (6.2% total).
Illinois ranks tied for #1 of 51 with 18 other states for the lowest state tax on this income. 19 states charge no state income tax on this income.
What retirees pay in Illinois
| Retirement income | State tax (single) | State tax (married) | Federal tax (single) |
|---|---|---|---|
| $24,000 Social Security, $12,000 401(k)/IRA | $0 | $0 | $0 |
| $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA | $0 | $0 | $4,336 |
| $40,000 Social Security, $40,000 pension, $50,000 401(k)/IRA, $10,000 other income | $301 | $106 | $19,812 |
Age 67 or older, 2026 rules including the federal senior deduction. For married couples, income is the household total and both spouses are 67 or older. State estimates apply Illinois's main exclusions and may differ for income-tested credits.
Moving to Illinois in retirement?
Compare the tax on your Social Security, pension and 401(k)/IRA income, and typical living costs, with the state you'd leave. These are the states most households moving to Illinois come from (IRS migration data, 2022–2023).
- Indiana to Illinois
- Florida to Illinois
- California to Illinois
- Texas to Illinois
- Wisconsin to Illinois
- Missouri to Illinois
Frequently asked questions
Does Illinois tax Social Security?
Not taxed. Illinois subtracts all Social Security benefits included in federal AGI, at any income level.
Does Illinois tax pensions?
Not taxed. Distributions from qualified employer plans and all government pensions (including military) are fully subtracted at any age. Nonqualified plan income is taxable.
Does Illinois tax 401(k) and IRA withdrawals?
Not taxed. 401(k), IRA, SEP and self-employed plan withdrawals are fully exempt, including early distributions and Roth conversions.
Is Illinois a good state to retire for taxes?
For a single retiree with $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA, Illinois charges about $0 in state income tax, ranking tied for #1 of 51 with 18 other states (lowest tax first).
Related
Sources: tax.illinois.gov. Rules reviewed .