Illinois retirement taxes in 2026: what retirees pay

Illinois has a flat income tax, but most of what retirees live on falls outside it. The state doesn't tax Social Security benefits, and it doesn't tax pension income or withdrawals from retirement accounts either. So for many households, the flat rate matters less once paychecks stop than it did during their working years. The rate still applies to other kinds of income. That includes wages from part-time work and earnings from investments held outside retirement accounts. Below is how those pieces come together.

Illinois retirement taxes at a glance (2026)

Illinois's income tax rate for 2026

Illinois taxes income at a flat 4.95% 1.

How Illinois treats retirement income

Illinois does not tax pension or retirement-account income. 1

What three retirees would pay in Illinois

These are estimates from Monte Climb's planner on 2026 law, for three example households. They start, as the app does, from federal taxable income: the 2026 standard deduction plus the extra amount at 65 3, the taxable part of Social Security 4 and the senior deduction 5. Those federal deductions are already taken off, and most states allow less of their own, so Illinois's real bill can be higher than shown.

• A single retiree, 67 with $54,000 of income would owe about $0 to Illinois, after $30,000 of retirement income is excluded and $11,300 of taxable Social Security is left out.
• A married couple, both 67 with $106,000 of income would owe about $0 to Illinois, after $60,000 of retirement income is excluded and $35,700 of taxable Social Security is left out.
• A married couple, both 62, before Social Security with $76,000 of income would owe about $0 to Illinois, after $70,000 of retirement income is excluded.

The same couple next door

The married couple, both 67, with $106,000 of income, in Illinois and the states around it:

Every figure here starts from federal taxable income, as above, so a state whose own deductions are smaller can tax more than shown.

What these estimates leave out

• Illinois's own standard deduction, exemptions and credits: the estimate starts from federal taxable income instead, which takes off the larger federal deductions.
• City income taxes, and capital gains rules a state applies apart from its rate.
• Rules for military and public-employee pensions that some states treat separately.

What this means for your plan

In Illinois, the question is less about how much of your retirement income gets taxed and more about which kinds of income it is. Social Security, pensions and retirement-account withdrawals all fall outside the state income tax, so the flat rate mostly comes into play for income from other sources. That puts the focus on what share of your plan comes from outside those exempt categories. Monte Climb runs the Illinois rules on your own mix of income, year by year, so you can see where the flat rate actually touches your plan.

Sources

1. Illinois income tax for 2026 (Monte Climb's audit grades it high)
2. Illinois: a further official source for the 2026 tables
3. Rev. Proc. 2025-32 §4.14(1) and §4.14(3): the 2026 standard deduction and the additional amount at 65
4. IRC §86 and IRS Publication 915: how much of Social Security is taxable (thresholds set by statute, not indexed)
5. P.L. 119-21 (One Big Beautiful Bill Act) §70103: the $6,000 deduction for each person 65 or older, 2025–2028

Figures computed by code from Monte Climb's 2026 state tables (snapshot f024e17). An illustration, not tax advice.

Frequently asked questions

Does Illinois tax Social Security?

In 2026, Social Security is not taxed in Illinois.

What is Illinois's income tax rate in 2026?

Illinois has a flat 4.95% for 2026.

How much state tax would a retired couple pay in Illinois?

A married couple, both 67, with $106,000 of Social Security, pension and IRA income would owe about $0 to Illinois in 2026, by Monte Climb's estimate.