Illinois — Personal Income Tax

Illinois law provides that for taxable years beginning on or after January 1, 2025, the personal income tax rate imposed on every individual, trust, and estate is 3.25% of net income, as set forth in 35 ILCS 5/201(a). The operative language of the statute states: "For taxable years beginning on or after January 1, 2025, the rate of tax imposed by this subsection (a) shall be 3.25% for individuals, trusts, and estates." This provision was enacted by Public Act 100-0022 and its progeny (including HB 4211, which was a legislative vehicle for the amendment). No differences in effective date, no phase-in schedule, and no bracket/stretch rules apply to trusts or estates as compared to individuals; the statute applies the same rate across all filers in these categories. No sunset clause appears in the current statutory language as of July 2026.

However, as of July 2026, the Illinois Department of Revenue (IDOR) continues to list the income tax rate as 4.95% on its official website, published tax rate matrix, and tax forms available for tax years 2025 and 2026 (see IDOR's Income Tax Rates page, last revised July 2026). No Informational Bulletins, notices, or agency publications from IDOR reflect the implementation of the statutory 3.25% rate for the affected tax years, and agency guidance for tax year 2025 forms continues to reference 4.95% for individual, trust, and estate taxpayers.

This creates a clear divergence: the written statute prescribes a 3.25% rate effective January 1, 2025, while the Department continues to administer and collect at 4.95% as of July 2026. No evidence of administrative delay, sunset, or further legislative reversal is present in official DOR or legislative sources as of this date. Practitioners and taxpayers should be aware of this statutory/administrative mismatch when evaluating returns for tax years 2025 and beyond.

Source: 35 ILCS 5/201(a) Source: Illinois Department of Revenue – Income Tax Rates Source: HB 4211 (2017)

Not yet human confirmed. Most recent DOR and legislative sources checked July 2026.

An individual is an Illinois resident for personal income tax purposes under either of two tests. First, an individual who is in Illinois for other than a temporary or transitory purpose during the taxable year is a resident. Second, an individual who is domiciled in Illinois but is absent from the state for a temporary or transitory purpose during the taxable year is also a resident.

Illinois residents are taxed on all income from any source, regardless of where earned. Nonresidents are taxed only on income earned or received from Illinois sources. The determination is inherently fact-specific and depends on the individual's intent and the nature of their presence or absence.

The regulations clarify that brief visits for vacation, a particular transaction, or a short-term engagement constitute temporary or transitory purposes. In contrast, presence in Illinois for an indefinite period to recuperate from illness, for long-term business purposes, for indefinite employment, or after retirement without definite intention to leave shortly is considered other than temporary or transitory.

Source: 35 ILCS 5/1501(a)(20); 86 Ill. Admin. Code § 100.3020

Illinois individual income tax returns for calendar-year filers are due April 15 of the year following the tax year. If April 15 falls on a weekend or holiday, the return is due on the next business day. The state grants an automatic six-month extension of time to file, moving the extended deadline to October 15 for calendar-year filers. An extension to file does not extend the time to pay; any tax owed must be paid by the original April 15 deadline to avoid penalties and interest.

Source: Illinois Department of Revenue – When is my individual income tax return due; Illinois Department of Revenue – Due Date/Extension

Illinois base income for individuals equals the taxpayer's federal adjusted gross income (AGI) as modified by Illinois-specific additions and subtractions. The starting point is the AGI amount from the federal return, which the taxpayer must then adjust. Common additions include interest and dividends excluded from federal AGI (such as municipal bond interest from other states). Common subtractions include retirement income and Social Security benefits that are taxable federally but exempt in Illinois. The statute prescribes the complete list of required modifications.

Source: 35 ILCS 5/203; Illinois Department of Revenue – How is Illinois base income figured?

Illinois allows a personal exemption allowance for individual income tax that is adjusted annually for inflation, as required by law. The exemption amounts and phase-out rules are as follows:

Tax year 2024 (returns filed in 2025): The personal exemption amount is $2,775 per qualifying individual (including the taxpayer, spouse, and qualifying dependents).

Tax year 2025 (returns filed in 2026): The personal exemption amount increases to $2,850, per the Illinois Department of Revenue's latest published guidance and statutory inflation adjustments.

Tax year 2026 (returns filed in 2027): The exemption will increase to $2,925 per qualifying individual, as recently announced by the Illinois Department of Revenue (IDOR Informational Bulletin FY 2026-15).

Additional exemptions: Individuals who are age 65 or older, or who are legally blind, may claim an additional $1,000 exemption for each status.

Income limits (phase-out): No exemption is allowed if federal adjusted gross income (AGI) exceeds $500,000 for married filing jointly, or $250,000 for all other filers, pursuant to the governing statute and continued in IDOR publications.

Statutory authority: The exemption and its cost-of-living adjustment are provided by 35 ILCS 5/204. The Department of Revenue is required to announce updated amounts by bulletin and on its website before the beginning of each tax year.

Summary of recent years:

• 2023: $2,425
• 2024: $2,775
• 2025: $2,850
• 2026: $2,925

Taxpayers should always check the latest DOR bulletin and the IDOR Q&A to confirm the exemption amount that applies for their filing year.

Source: 35 ILCS 5/204; Illinois Department of Revenue Informational Bulletin FY 2026-15; Illinois Department of Revenue – Personal Exemption Allowance

Not yet human confirmed. Updated July 2024 to reflect exemption increases for tax years 2024–2026.

Illinois taxes compensation paid to nonresidents based on where the services are physically performed, not where the employer is located or where the employee resides. Under 35 ILCS 5/302(a), all items of compensation paid in Illinois to a nonresident individual and all items of deduction directly allocable to that compensation are allocated to Illinois.

Determining "Paid in This State"

Compensation is considered "paid in this State" when it is compensation for services performed in Illinois. The statute cross-references Section 304(a)(2)(B) for the determination of when compensation is paid in Illinois. The critical distinction is between the physical location of work performance and other factors such as employer location, payment location, or employee residence.

For a nonresident working partly in Illinois and partly in other states, Illinois taxes the portion of total compensation that the services performed in Illinois bear to total services performed everywhere. The regulations provide that compensation is allocated based on the ratio of days worked in Illinois to total days worked during the relevant period.

Working Remotely for an Illinois Employer

A nonresident employee who performs services entirely outside Illinois for an Illinois-based employer does not owe Illinois income tax on that compensation, even if the employer withholds Illinois tax or the employee receives payment in Illinois. The sourcing follows the location of service performance, not the employer's location or domicile.

Conversely, a nonresident who physically works in Illinois—whether at an employer's Illinois office, at a client site in Illinois, or at a temporary Illinois work location—incurs Illinois source income for the days worked in the state. The employer's state of incorporation or headquarters location is irrelevant to the sourcing determination.

Reciprocal Exemptions

Illinois has entered into reciprocal agreements with certain neighboring states under 35 ILCS 5/302(b). Under a reciprocal agreement, compensation paid in Illinois to a resident of the reciprocal state is exempt from Illinois taxation, and Illinois residents working in the reciprocal state are exempt from that state's tax. As of the statute's current provisions, reciprocal agreements must comply with the requirements of the Department of Revenue Law at 20 ILCS 2505/2505-575.

Iowa, Kentucky, Michigan, and Wisconsin are the states with which Illinois maintains income tax reciprocity agreements. A nonresident from one of these states who works in Illinois claims exemption by filing Form IL-W-5-NR with the employer, which stops Illinois withholding. The reciprocal exemption does not apply to residents of states without an agreement; for example, Indiana residents working in Illinois owe Illinois income tax on their Illinois-source compensation.

Part-Year Residents

Individuals who move into or out of Illinois during the tax year are part-year residents subject to different allocation rules under 35 ILCS 5/301(b). Part-year residents are taxed on all income earned during the period of Illinois residency, regardless of where earned, and only on Illinois-source income during the nonresident period. The nonresident compensation sourcing rules apply only to the portion of the year the individual was a nonresident.

Professional Athletes and Specialized Rules

Illinois has a specific statutory allocation formula for nonresident professional athletes under 35 ILCS 5/302(c)(iv). The Illinois source income of a nonresident professional athlete is the total compensation multiplied by a fraction: the numerator is duty days spent in Illinois, and the denominator is total duty days spent everywhere. Travel days that do not involve a game, practice, team meeting, or similar team event are not counted as Illinois duty days but are included in the total duty-day denominator.

Source: 35 ILCS 5/302; 86 Ill. Admin. Code § 100.3120

Illinois exempts most federally taxable retirement income from state income tax via a subtraction modification to base income. Under 35 ILCS 5/203(a)(2)(F), qualifying retirement income—including payments from qualified employee benefit plans (401(k), 403(b), etc.), IRAs, government and military pensions, Social Security benefits (to the extent taxed federally), and public retirement systems—is subtracted in arriving at Illinois base income. There is no age requirement or income limitation: retirees of any income level, regardless of their adjusted gross income, may claim the subtraction on the Illinois return.

No current income cap or phase-out As of July 2026, Illinois law imposes no dollar-based cap or phase-out for the retirement income subtraction. A taxpayer with $2 million of retirement distributions (if federally taxable and qualifying under state rules) may fully subtract those amounts on their Illinois individual income tax return. There are no statutory or regulatory restrictions reducing this benefit for high-income filers. This position is confirmed by both the statute (35 ILCS 5/203(a)(2)(F)) and the Illinois Department of Revenue’s most recent Publication 120: Retirement Income, as well as the official DOR web guidance for individual filers.

Recent and pending legislation No amendments to 35 ILCS 5/203 or to related sections have been enacted, proposed, or advanced in legislative committees as of July 2026 to cap, limit, or phase out the retirement income subtraction for high-income taxpayers. The Illinois Department of Revenue has issued no bulletins or publications indicating a change is imminent. While the Illinois General Assembly has periodically debated broader personal income tax structural reform—including a "millionaire surcharge" (a 3% surtax on net income above $1,000,000, requiring a constitutional amendment)—no recent bill specifically targets the retirement income subtraction. Such proposals, even if adopted, would apply to all net income and would not constitute a targeted restriction on retirement income subtraction itself. Legislative tracking and DOR bulletins should still be monitored in future years, as tax law changes are regularly considered in periods of fiscal stress.

Summary As of July 2026, practitioners and taxpayers may rely on there being no restriction, cap, or phase-out of the retirement income subtraction for high-income Illinois filers, and no credible pending legislative threat to this benefit. All qualifying retirement income remains fully excludable regardless of total income.

Source: 35 ILCS 5/203(a)(2)(F) Source: Illinois Department of Revenue Publication 120 (Retirement Income) Source: Illinois Department of Revenue – Social Security benefits and certain retirement plans

Not yet human confirmed. Researched to ILGA and DOR sources as of July 2026.

Note: The ILGA statutory source link for 35 ILCS 5/203 was updated in July 2026 to reflect the legislature’s new document location. No substantive rule or eligibility change occurred as of this date.

Illinois allows individual taxpayers to claim a nonrefundable property tax credit on Form IL-1040 equal to a percentage of real property taxes actually paid during the taxable year on their principal residence in Illinois, subject to an income limit. The credit is calculated on Schedule ICR and reported on Form IL-1040, Line 16.

Credit Percentage and Qualifying Property Under 35 ILCS 5/208, for tax years ending after December 31, 1991 and before December 31, 2026, individual residents are entitled to a credit equal to 5 percent of real property taxes paid during the tax year on their principal residence—the property owned and occupied by the taxpayer as their primary residence in Illinois. For multi-unit or farm dwellings, only the portion of taxes allocable to the taxpayer’s principal residence qualifies. Property tax must be paid (not just billed) in the taxable year, and the property must have been owned and occupied by the taxpayer.

Upcoming Change (TY2026 and after) For tax years ending on or after December 31, 2026, the statutory percentage is increased to 10 percent of real property taxes paid on the principal residence, pursuant to SB3868, amending 35 ILCS 5/208. Practitioners and taxpayers should note this change will first apply to returns filed in 2027 for tax year 2026.

Income Limits For tax years beginning on or after January 1, 2017, the property tax credit is disallowed if federal adjusted gross income exceeds $500,000 for joint filers or $250,000 for all other filers. There is no phase-out; taxpayers above the income limit receive no benefit from the credit.

Calculation and Where to Claim the Credit

• Taxpayers multiply the amount of Illinois real property tax paid in the tax year (on the main home they owned and occupied) by 5% (pre-2026), or by 10% (for TY2026 and after).
• The claim is made on Schedule ICR (Illinois Credits), which must be attached to IL-1040. Enter the property's parcel number, amount of property tax paid, and other schedule details as required.
• The allowable credit is transferred to Form IL-1040, Line 16. The credit is nonrefundable and cannot be carried forward to future years.

Effective Dates and Authority

• 5 percent rate: Tax years ending after Dec. 31, 1991 and before Dec. 31, 2026
• 10 percent rate: Tax years ending on or after Dec. 31, 2026

Source: 35 ILCS 5/208 Source: SB3868 (2025) amending 35 ILCS 5/208 Source: 86 Ill. Admin. Code 100.2180 Source: Illinois Department of Revenue Publication 108 Source: Schedule ICR Instructions (IL-1040) Source: IDOR Income Tax Credits and Expirations

Illinois requires individual taxpayers to make estimated income tax payments if their expected tax due, after withholding and refundable credits, will exceed $1,000 for the tax year. This obligation applies to residents and nonresidents with Illinois-source income who anticipate meeting the tax liability threshold.

When Estimated Payments Are Required Estimated tax payments must be made if the taxpayer expects to owe more than $1,000 in Illinois income tax for the year after subtracting tax withheld and any refundable credits. This threshold is set in the statute at 35 ILCS 5/803 and clarified by the Illinois Department of Revenue (IDOR). For most individuals, Form IL-1040-ES is used to calculate and submit estimated payments.

Safe Harbor to Avoid Underpayment Penalty Taxpayers can avoid underpayment penalties by meeting statutory safe harbor provisions. Under 35 ILCS 5/804, individuals are not subject to an underpayment penalty if the amount paid through estimated payments and withholding meets one of the following conditions:

• At least 90% of the current year’s tax liability, or
• 100% of the prior year’s tax liability (110% if prior year AGI was more than $150,000 for married filing jointly or $75,000 for other filers).

The safe harbor rules are directly modeled on federal estimated tax penalty provisions but use Illinois tax liability and AGI figures. Estimated payments are applied with withholding to determine whether the taxpayer met the necessary amount. IDOR Publication 130 and Form IL-2210 provide additional detail about penalty waiver standards and computation methods.

Quarterly Due Dates Estimated tax payments are due in four installments for calendar-year filers, generally on:

• April 15
• June 15
• September 15
• January 15 of the following year

If a due date falls on a weekend or holiday, the payment is due the next business day. Payments can be made electronically or by mailing Form IL-1040-ES vouchers.

Source: 35 ILCS 5/803; 35 ILCS 5/804; Illinois Department of Revenue Publication 130

Not yet human confirmed. All statutory citations and Department publications link to current official URLs as of July 2026.

A nonresident individual must file an Illinois income tax return (Form IL-1040) if their Illinois base income, calculated on Schedule NR, is greater than their Illinois exemption allowance—even if they are not required to file a federal income tax return for that year. The Illinois Department of Revenue (IDOR) explicitly states that the filing obligation is based on Illinois-source income and not on federal filing requirements.

Filing obligation and calculation framework If a nonresident's Illinois base income (Schedule NR, Step 5, Line 46) exceeds their Illinois exemption allowance (Schedule NR, Step 5, Line 50), a return is required. The exemption allowance amount is adjusted annually; for example, for tax year 2023, the amount is $2,425 per individual, as published by the IDOR. If a nonresident’s Illinois base income does not exceed the exemption, no Illinois return is required unless another filing trigger applies.

Authority The filing requirement for nonresidents not required to file federally is established in IDOR’s published guidance. The current exemption allowance for each tax year can be confirmed via IDOR’s tables.

Example For tax year 2023, suppose a nonresident’s Illinois base income is $2,600 and their Illinois exemption allowance is $2,425; a return is required. If the base income is $2,400, no return is required. For future years, check the IDOR’s published exemption figures.

Source: Illinois Department of Revenue – Individual Filing Requirements

Not yet human confirmed.

An Illinois resident individual may claim both the Illinois PTE tax credit, which offsets their own Illinois tax liability for the entity-level tax paid by a partnership or S corporation under IITA § 201(p), and the Schedule CR credit for income taxes paid to another state on the same income.

However, Illinois law prohibits duplicative benefit. Under 86 Ill. Adm. Code § 100.2197 (implementing IITA § 601(b)(3)), any credit that was used to reduce the amount of tax “actually paid or payable” to another state must reduce the amount of foreign tax credit (Schedule CR) allowable on the Illinois return.

Practical implications:

• If the PTE tax credit relates exclusively to Illinois tax, with no effect on other-state tax liability or withholding, it does not trigger reduction of the Schedule CR credit.
• If, however, the PTE credit is used by the taxpayer (or by the entity) in another state to offset that state’s tax liability, then the portion attributable to that reduction must reduce the Schedule CR credit—because it effectively decreases the “actual tax paid” to the other state.

Practitioner steps: • Determine whether the other state accepts the PTE tax payment or credit as a reduction of the taxpayer’s liability. • If yes, quantify the amount of Illinois PTE-related reduction in that other state and reduce the Schedule CR claim by that amount per § 100.2197. • If no, the Schedule CR credit remains fully available (subject to the general limit calculations).

This coordination rule implements Illinois’ general prohibition on duplicate tax credits for the same income, and does not determine the mechanics of other states’ PTE regimes. It applies only to Illinois residents and part-year residents eligible for the Schedule CR credit.

Source: 86 Ill. Adm. Code § 100.2197 (Illinois Administrative Code, implementing IITA § 601(b)(3))

Not yet human confirmed.

Illinois law allows individual residents and part-year residents to claim a credit against Illinois income tax for income taxes paid to another state on income that is taxed by both Illinois and the other state. This credit is designed to prevent double taxation of the same income.

Statutory authority — 35 ILCS 5/601(b) — provides that a credit is allowed for the lesser of: (1) the actual tax paid to the other state on income also taxed by Illinois, or (2) the amount of Illinois tax attributable to that income. The credit applies only to net income tax paid to other states of the United States or the District of Columbia, not to local taxes, franchise taxes, or taxes paid to foreign countries. The taxpayer must have been liable for, and have actually paid, the other state's tax on the relevant income.

Eligible taxpayers:

• Illinois full-year residents: May claim the credit on income taxed by Illinois and by another state (e.g., wage income earned from work performed in a different state, pass-through or investment income apportioned or sourced by another state).
• Illinois part-year residents: The credit applies only to such income earned while a resident of Illinois.
• Nonresidents: Not eligible for this credit.

The credit does not apply to taxes paid to cities, counties, or subdivisions (e.g., New York City tax), nor to taxes imposed by foreign countries. Only state-level income taxes qualify. The Department of Revenue clarifies that you must attach a copy of the other state's tax return and proof of payment to your Illinois return to substantiate the credit claim; documentation should also be retained for audit support.

Computation:

• The credit is computed on Schedule CR (Credit for Tax Paid to Other States), which must be attached to Form IL-1040.
• The credit is capped at the proportion of Illinois tax attributable to the income taxed by the other state. If you paid more to the other state, you cannot claim a credit greater than your Illinois liability on that income.

Special rules:

• The credit is not allowed if the other state provides a reciprocal exemption (e.g., for Illinois residents commuting to Kentucky, Michigan, Iowa, or Wisconsin), or if the double-taxed income results from Illinois' add-back modifications to federal AGI.

Relevant reporting and annual procedures, including detailed computation and examples, are explained in the Department's Schedule CR instructions. Taxpayers should review the most current guidance each year, as requirements and procedures are subject to update.

Source: 35 ILCS 5/601(b) Source: 2025 Schedule CR and Instructions Source: IL-1040 Schedule CR Form (PDF)