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Illinois Taxes: What You Need to Know
Illinois follows a simple tax system with a flat tax rate for all income levels. Illinois does not have local income taxes, but property and sales taxes vary by location.
Federal, State, and Local Tax Withholding in Illinois in 2026
Federal Income Tax in Illinois
The federal tax system uses progressive brackets. Rates increase as income rises. For 2026, the federal tax brackets for single filers are:
| Tax Rate | Income Range |
|---|---|
| 10% | Up to $12,400 |
| 12% | $12,401 to $50,400 |
| 22% | $50,401 to $105,700 |
| 24% | $105,701 to $201,775 |
| 32% | $201,776 to $256,225 |
| 35% | $256,226 to $640,600 |
| 37% | Over $640,600 |
Federal tax brackets vary by filing status. Married couples filing jointly, and heads of household, have different thresholds. Tax withholding is calculated using your income and W-4 form.
Source: IRS Tax Inflation Adjustments for Tax Year 2026
Illinois State Income Tax
Illinois has a flat income tax rate of 4.95%. All residents pay the same percentage regardless of income. Unlike the federal system, there are no progressive brackets at the state level.
Examples:
- Earning $60,000 annually means paying $2,970 in state income tax.
- Earning $150,000 means paying $7,425 in state income tax.
There are no personal exemptions in Illinois. Wages, salaries, bonuses, and self-employment income are all subject to this tax.
Source: Illinois Department of Revenue
Local Taxes in Illinois
Illinois does not impose local income taxes on wages. However, property and sales taxes are significant sources of local revenue.
1. Property Taxes
Illinois has some of the highest property taxes in the U.S. The average effective property tax rate is approximately 2.16%. Rates vary by county. These taxes fund schools, infrastructure, and public services.
Example: On a home valued at $300,000, annual property tax could be around $6,480 based on the state average.
2. Sales Taxes
Illinois has a statewide base sales tax rate of 6.25%. Local taxes are added on top of this. In areas like Chicago, combined rates can reach 10.25%. The average combined state and local rate is approximately 8.82%.
Example: On a $1,000 purchase, you may pay between $62.50 and $102.50 in sales tax depending on your location.
Source: Illinois Department of Revenue
FICA and State Insurance Taxes in Illinois in 2026
1. FICA Taxes
FICA taxes apply nationwide and consist of two parts:
Social Security Tax:
- Rate: 6.2% (employee) and 6.2% (employer)
- Wage base limit for 2026: $184,500 (up from $168,600 in 2024)
- Income above $184,500 is not subject to Social Security tax
Medicare Tax:
- Rate: 1.45% on all wages with no wage base limit
- An additional 0.9% Medicare surtax applies to individuals earning over $200,000 (or over $250,000 for married couples filing jointly)
Source: SSA – Social Security Wage Base 2026 | IRS Publication 15 (2026)
2. State Unemployment Insurance (SUI)
Illinois employers pay into the state unemployment insurance fund. This tax is not deducted from employee wages. The current rate for Illinois employers varies depending on the employer’s specific unemployment experience and ranges from 0.525% to 6.925% on wages up to a taxable wage base of $14,250 for 2026.
Source: Illinois UI Tax Rates 2026
Pre-Tax Deductions in Illinois in 2026
Pre-tax deductions reduce your taxable income and lower your overall tax burden.
1. Health Insurance Premiums
- Employee contributions to employer-sponsored health insurance plans are deducted before taxes. This includes medical, dental, and vision coverage.
2. 401(k) and Retirement Contributions
- Contributions to 401(k) and 403(b) accounts are made pre-tax.
2026 contribution limits:
- Standard limit: $24,500 (up from $23,000 in 2024)
- Catch-up for age 50+: $8,000 (up from $7,500 in 2024)
- Enhanced catch-up for ages 60-63: $11,250 (new limit introduced under SECURE 2.0)
Source: IRS 401(k) Limits for 2026
3. Health Savings Accounts (HSA)
HSAs are available to individuals enrolled in a high-deductible health plan (HDHP).
2026 contribution limits:
- Self-only coverage: $4,400 (up from $4,150 in 2024)
- Family coverage: $8,750 (up from $8,300 in 2024)
- Individuals aged 55 and older can make an additional $1,000 catch-up contribution
Source: IRS Publication 969 (2025)
4. Flexible Spending Accounts (FSA)
FSAs let employees set aside pre-tax income for qualified medical or dependent care expenses.
2026 healthcare FSA contribution limit: $3,400 (up from $3,050 in 2024)
The maximum carryover amount for unused FSA funds is $680 for 2026.
Source: IRS Tax Inflation Adjustments for Tax Year 2026
2026 Illinois Tax Table Summary
| Tax Type | Rate/Amount |
|---|---|
| Illinois State Income Tax | 4.95% (flat) |
| FICA – Social Security | 6.2% (up to $184,500 in wages) |
| FICA – Medicare | 1.45% (additional 0.9% for high earners) |
| Federal Income Tax | Progressive, 10% to 37% |
| Local Property Tax | Average of 2.16% |
| Local Sales Tax | Combined state and local, approx. 8.82% avg |
Source: Illinois Department of Revenue
Illinois Tax Brackets 2026
Unlike many other states, Illinois uses a flat tax system. Every resident pays 4.95% on all taxable income regardless of earnings level.
Local taxes vary by location. Property taxes average 2.16% statewide and are among the highest in the country. Combined state and local sales taxes average 8.82%.
| Income Level | Tax Rate |
|---|---|
| All income levels | 4.95% |
Source: Illinois Department of Revenue
Wrapping Up
Illinois keeps state income tax straightforward with a flat 4.95% rate on all income, no matter what you earn. No local income taxes on wages either, which simplifies payroll. The tradeoff is that property taxes are among the highest in the country, averaging around 2.16%, and sales taxes can stack up quickly, especially in Chicago where combined rates hit over 10%. For paycheck purposes though, it’s a pretty predictable system.
