Does Illinois tax retirement income?

Does Illinois tax Social Security?

Illinois does not tax Social Security benefits.

Federally taxed Social Security and Railroad Retirement benefits are fully subtracted on Form IL-1040, with no age or income test.

Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.

Are pensions taxed in Illinois?

Pensions are fully exempt — public, private and military.

Illinois subtracts the federally taxable part of qualified employee benefit plans (pensions and 401(k)s), government retirement and disability plans including military, state and local 457 plans and Railroad Retirement — with no dollar cap and no age requirement. Early distributions qualify too. Non-government deferred compensation plans generally do not.

Public vs. private pensions: Treated the same: both exempt.

Are IRA and 401(k) withdrawals taxed in Illinois?

IRA and 401(k) withdrawals are fully exempt.

IRA distributions (including amounts converted to a Roth IRA), SEP plans and 401(k) distributions are fully subtracted at any age.

Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.

Is military retirement pay taxed in Illinois?

Military retirement pay is fully exempt.

What is Illinois’ income tax rate?

A flat 4.95%.

A flat 4.95% on net income — unchanged since July 1, 2017.

Standard deduction and exemptions

No standard deduction. The exemption allowance is $2,925 per person for 2026 ($2,850 for 2025), plus $1,000 more for each filer 65+ or blind. No exemption allowance if federal AGI is over $250,000 ($500,000 joint).

What tax breaks do seniors get in Illinois?

An extra $1,000 exemption for each filer 65 or older (or blind), on top of the full retirement income subtraction.

What changed for 2026?

We found no enacted 2025–2028 change to how Illinois taxes retirees. The exemption allowance is indexed each year; the 2027 amount is not yet announced.

The 4.95% rate has applied since July 1, 2017; the 2026 exemption amount is published.