Illinois Retirement Tax Calculator
Illinois exempts 100% of retirement income from state tax — Social Security, pensions, 401(k), IRA, military. But the 2nd highest property taxes in the US can offset the savings.
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The Illinois Retirement Tax Paradox
Illinois is one of only 3 states that exempt 100% of retirement income from state income tax. Social Security, pensions, 401(k), IRA, military retirement — all taxed at $0. For a retiree with $65,000 in retirement income, the Illinois income tax bill is exactly $0.
But here is the catch: Illinois has the 2nd highest property taxes in the US, averaging 2.10% effective rate. A $300,000 home costs roughly $6,300 per year in property taxes — compared to about $2,400 in Florida, which also charges $0 on retirement income. That $3,900 annual difference adds up to nearly $78,000 over 20 years of retirement.
The bottom line: Illinois is excellent for retirees who rent or have a low-value home. For homeowners, the property tax burden can more than offset the income tax savings.
How to Use This Calculator
Tax on My Retirement Income tab
Enter your Social Security, pension income, 401(k)/IRA withdrawals, and any other income (wages, self-employment). The calculator shows $0 tax on all retirement income and applies the 4.95% flat rate only to non-retirement income. A property tax reality check is included at the bottom.
What's Exempt? tab
See every type of retirement income that Illinois exempts — Social Security, government pensions, private pensions, military pay, 401(k), IRA, 403(b), 457, and Railroad Retirement. Also shows what is still taxed (wages, self-employment) and the property tax rates that offset the income tax benefit.
Compare States tab
Side-by-side comparison of Illinois vs Florida for retirees. Both charge $0 income tax on retirement, but the property tax difference is stark: IL $6,300/yr vs FL $2,400/yr on a $300K home. The comparison includes a 20-year projection and part-time wage tax impact.
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Illinois Retirement Income Tax Rules (2026)
Pensions (all types) = NOT taxed in IL
Government, military, private, railroad
401(k) withdrawals = NOT taxed in IL
IRA distributions = NOT taxed in IL
Traditional and Roth
403(b) / 457 plans = NOT taxed in IL
Wages and self-employment = TAXED at 4.95% flat
Property tax (statewide avg) = 2.10% effective rate
2nd highest in the US (national avg is 1.10%)
Illinois uses a flat income tax rate of 4.95% on all taxable income. Since retirement income is fully exempt, only earned income (wages, self-employment, business income) and investment income are subject to the state tax. There is no progressive bracket system and no additional surcharge for high earners.
Example
Robert — Retired teacher, age 68, married
Robert receives Social Security, a state pension from the Teachers' Retirement System, and takes 401(k) distributions. He wants to know his Illinois tax bill and how it compares to moving to Florida.
Income breakdown
Illinois tax calculation
But property tax tells a different story
Robert pays $0 income tax in Illinois on his $65,000 retirement income. But his $300K home costs $6,300/yr in property taxes. If he moved to Florida, he would still pay $0 income tax but only $2,400/yr in property taxes — saving $3,900/yr ($78,000 over 20 years).