How Illinois taxes retirement income
Illinois does not tax Social Security benefits. Pension income is also exempt. Illinois fully exempts Social Security benefits, qualified pension income, and 401(k)/IRA/403(b) withdrawals from state income tax under Section 203(a) of the Illinois Income Tax Act despite having a state income tax
Retirement income tax in Illinois, at a glance
| Income type | Taxed by Illinois? |
|---|---|
| Social Security | No |
| Pensions | No |
| 401(k) / IRA withdrawals | No |
| Estate / inheritance tax | Estate tax (exemption $4,000,000) |
| Avg. property tax rate | 1.88% of home value |
Does Illinois tax Social Security benefits?
No. Illinois does not tax Social Security benefits.
Does Illinois tax pensions and 401(k) or IRA withdrawals?
Illinois exempts pension income, though other retirement withdrawals may still be taxed. Illinois fully exempts Social Security benefits, qualified pension income, and 401(k)/IRA/403(b) withdrawals from state income tax under Section 203(a) of the Illinois Income Tax Act despite having a state income tax
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Illinois taxation of retirement income (Social Security, pensions, 401(k)/IRA): Illinois Department of Revenue / Taxation.
- Illinois estate / inheritance tax: Illinois tax authority.