Kate Schubel
Illinois state tax: Overview
When you think about states with high taxes, Illinois may not immediately come to mind. However, the Prairie State has one of the highest sales tax rates in the U.S., some of the highest property taxes in the nation, and still taxes groceries, diapers, and prescription drugs — essentials that could be tax-exempt in other states.
But there may be some good to all this "bad" tax news. When you retire, Illinois is one of the states that don't tax retirement income. Plus, there is no state personal property tax, which means you won't pay annual property taxes on your car.
Read on for more of what you need to know as a current or prospective Illinois taxpayer.
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[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, and the Sales Tax Handbook. Property taxes are cited as a rate percentage rather than the assessed value.]
Illinois income taxes
Illinois imposes a flat individual income tax rate of 4.95%.
Illinois income taxes in retirement: Income from most retirement plans is exempt, including payments from qualified employee benefit plans (401(k) plans and traditional pensions), government retirement plans, military pensions, and IRAs. Social Security benefits and Railroad Retirement benefits are also exempt from Illinois state income tax.
Illinois sales tax
Illinois has a 6.25% state sales tax. Localities can add as much as 4.75%, and the average combined rate is 8.890%, according to the Tax Foundation.
Residents of Illinois must pay sales tax on items that are tax-exempt in some other states.
- Groceries are taxed at a reduced rate of 1%, but local taxes might apply.
- Diapers are taxable, but women's menstrual products are not.
- Prescription drugs are taxable at a reduced rate of 1%.
How much are property taxes in Illinois?
According to the Tax Foundation, the average effective property tax rate in Illinois is 1.95%, which is one of the highest rates in the country, and median property taxes are over $5,000.
Illinois Property Tax Breaks for Retirees
Homestead Exemption: Adults 65 or older might qualify for a property tax exemption of up to $6,000 of a property's assessed value (up to $10,000 in Cook County and $8,000 in counties contiguous to Cook). Illinois offers other types of homestead exemptions to some people younger than 65 too, but exemption amounts may differ.
Assessment Freeze Homestead Exemption: Qualified adults 65 and older may have their property's assessed value frozen. To qualify for the freeze, household income must not exceed $65,000.
Real Estate Tax Deferral Program: Qualified residents age 65 or older with a household income of $65,000 or less can defer up to $7,500 in property tax payments.
Illinois motor fuel (gasoline) taxes
Gasoline: $0.47 per gallon
Diesel: $0.545 per gallon
Illinois taxes on alcohol and tobacco
Cigarettes and little cigars | $2.98 per pack of 20 |
Vapor products | 15% of wholesale price |
Beer | $0.23 per gallon |
Wine | $1.39 per gallon |
Liquor | $8.55 per gallon |
Illinois estate and inheritance taxes
Illinois has an estate tax with a $4 million exemption. Estate tax rates range from 0.8% to 16%. There is no inheritance tax in Illinois.
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