Taxes in Chicago
Illinois levies a real, simple, flat 4.95% state income tax with no local or municipal add-on -- genuinely simpler than Philadelphia's own separate Wage Tax system covered elsewhere in this project -- and, distinctively, Illinois does NOT tax retirement income at all (Social Security, pensions, and 401(k)/IRA distributions are fully exempt), a real, substantial positive for retirees this record states plainly. What Chicago residents pay instead is a genuinely high combined sales tax (~10.25%) and a real, disclosed property tax burden, both detailed on their own topic pages.
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Learn moreIllinois's Flat 4.95% State Income Tax Is Genuinely Simple, With No Local Add-On
Illinois's state income tax is a simple, flat 4.95% -- with no graduated brackets to navigate, and genuinely no municipal or local income tax layer of the kind Philadelphia levies through its own separate Wage Tax (covered elsewhere in this project). This applies uniformly to Illinois residents regardless of which specific municipality they live in.
Illinois Does Not Tax Retirement Income -- A Real, Distinctive, Substantial Positive
This is Illinois's single most distinctive, retirement-relevant tax fact, and this record states it precisely: Social Security benefits, pension income, and 401(k)/IRA distributions are all fully exempt from Illinois state income tax. This is a real, substantial relocation positive for retirees that this record does not bury under the state's other real fiscal negatives (see the fiscal context in this record's population and jobs-economy notes) -- see the retiring topic page for more detail.
Chicago's Real, Genuinely High Combined Sales Tax
As detailed further on the cost-of-living topic page, Chicago's combined sales tax runs approximately 10.25% (6.25% state + 1.75% city + 1.25% Cook County + 1% RTA transit surcharge) -- among the highest combined sales tax rates of any major US city. This is a real, ongoing cost on everyday purchases that Illinois's low, simple income tax does not offset.
A Real, Disclosed Property Tax Spread by Specific Location
As detailed on the property-taxes topic page, Chicago's own effective property tax rate carries a real, disclosed spread: approximately 1.66% in Chicago proper (the lowest in Cook County) up to 2.5%-3.5%+ in some Cook County suburbs, with the county overall averaging approximately 1.91%. Confirm the actual current rate for a specific address directly with the Cook County Assessor's Office.
No Local Chicago Wage or Payroll Tax
Unlike Philadelphia's own separate Wage Tax (covered elsewhere in this project), Chicago does not levy its own separate municipal wage or payroll tax on residents or commuters -- Illinois's flat 4.95% state income tax is genuinely the full income-tax picture for a Chicago resident, a real, meaningful simplification relative to cities with a comparable local wage-tax layer.
Key takeaways
- Illinois's flat 4.95% state income tax carries no local/municipal add-on -- genuinely simpler than Philadelphia's own separate Wage Tax system.
- Illinois does NOT tax retirement income at all -- Social Security, pensions, and 401(k)/IRA distributions are fully exempt -- a real, substantial positive for retirees.
- Chicago's combined sales tax runs approximately 10.25% (6.25% state + 1.75% city + 1.25% Cook County + 1% RTA) -- among the highest of any major US city.
- Chicago's property tax rate carries a real, disclosed spread by specific location: ~1.66% in the city proper up to 2.5%-3.5%+ in some Cook County suburbs.
- Chicago does not levy a separate local wage or payroll tax -- Illinois's flat 4.95% state rate is the full income-tax picture for residents.
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