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Official Tax Guide

Illinois Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to Illinois state taxes. Income tax (4.95% (Flat)), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

State Tax Guide 2025: Illinois

Moving to Illinois involves navigating a specific tax landscape. This guide breaks down the key taxes you will encounter as a resident, from income and sales tax to property levies.

1. Income Tax

Illinois utilizes a flat tax structure. This is distinct from a progressive tax system where rates increase as income rises.

  • The Rate: The state personal income tax rate is 4.95%.
  • How it Works:
    • Flat Rate: Every taxpayer pays the same percentage of their adjusted gross income, regardless of how much they earn.
    • No Brackets: Unlike states like California or New York, there are no varying tax brackets based on income thresholds.
    • Federal Comparison: This rate is significantly lower than the highest federal income tax brackets but applies consistently to taxable income earned within the state.

2. Sales Tax

Illinois sales tax is a combination of state and local rates.

  • State Rate: The base state sales tax rate is 6.25%.
  • Local Additions: Counties and municipalities are authorized to levy additional sales taxes.
    • Total Rate: When combining the state rate with local county, city, and special district taxes, the total sales tax rate typically ranges from 6.25% to over 11% depending on the specific location within Illinois.
    • Retail Goods: Generally applies to most tangible goods.
    • Services: Most services are not subject to sales tax, though there are exceptions for specific industries (e.g., amusements, select personal care services).

3. Property Tax

Property taxes in Illinois are primarily used to fund local government services, including public schools, which are often the largest portion of a tax bill.

  • Overview: Illinois property taxes are generally considered high compared to the national average.
  • Assessment: Taxes are calculated based on the assessed value of real estate. The system uses a "multiplier" to equalize assessments across different counties.
  • Typical Burden: While rates vary by county and municipality, effective property tax rates often fall in the 2% to 3% range of a home's market value.
    • Example: On a $300,000 home, annual property taxes could range from $6,000 to $9,000 depending on the local levy.
  • Exemptions: Illinois offers several exemptions that can lower your tax bill, most notably the General Homestead Exemption for primary residences.

4. Other Taxes

Beyond income and sales, Illinois imposes several specific taxes that impact daily life and financial planning.

  • Motor Fuel Tax: Illinois has a motor fuel tax to maintain infrastructure. The rate is subject to periodic adjustments; as of 2025, expect a combination of state and federal taxes contributing to the price per gallon.
  • "Sin" Taxes:
    • Cannabis: The state imposes an excise tax on recreational cannabis sales, ranging from 10% to 25% depending on the product type and THC content, plus standard sales tax.
    • Alcohol & Tobacco: Rates vary but are generally moderate. For example, cigarettes are taxed at a rate of $2.98 per pack (20 cigarettes).
  • Inheritance Tax: Unlike the federal estate tax (which applies to very high-value estates) or some states that impose an estate tax on the estate before distribution, Illinois has an Inheritance Tax. This tax is levied on the beneficiary receiving the assets.
    • Rates: Rates vary from 0% to 15%, depending on the value of the inheritance and the relationship to the deceased (spouses and direct lineal descendants are generally exempt).

5. Retiree Taxes

Illinois offers significant tax breaks for retirees, making it an attractive destination for those living on fixed incomes.

  • Retirement Income: Illinois does not tax income from retirement accounts, including:
    • 401(k) plans
    • IRAs
    • Pensions
    • Social Security benefits (Note: Social Security is not taxed at the federal level, and Illinois does not tax it either).
  • Senior Citizens Homestead Exemption: Homeowners aged 65 or older may qualify for an additional property tax exemption on their primary residence, further reducing their property tax burden.

6. Comparison to Neighboring States

When planning your move, it is helpful to see how Illinois stacks up against its neighbors:

  • Illinois vs. Indiana: Indiana also utilizes a flat income tax, but its rate is lower at 3.05%. However, Indiana taxes most retirement income, whereas Illinois does not. Sales tax rates are generally comparable, though Indiana prohibits local sales taxes, capping the total at 7%.
  • Illinois vs. Wisconsin: Wisconsin has a progressive income tax system with rates ranging from 3.5% to 7.65%. While lower-income earners might pay less in Wisconsin, higher earners often find Illinois' flat 4.95% rate more favorable. Wisconsin also taxes some retirement income, depending on the source and amount.
  • Illinois vs. Missouri: Missouri has a progressive income tax rate (currently 4.7% for top earners as of 2025, subject to legislative changes) and offers a property tax credit for seniors. Illinois generally has lower income tax rates for higher earners compared to Missouri's top brackets, but higher property tax rates.

Disclaimer: Tax laws change frequently and can vary based on individual circumstances. The information provided in this guide is for educational purposes only and should not be considered legal or financial advice. Consult a Certified Public Accountant (CPA) or tax professional before making significant financial decisions.