Does Illinois tax pensions and retirement income?
Most retirement income not taxed
No. Illinois lets you subtract federally taxed retirement income from qualified employee benefit plans, including 401(k) plans, and from IRAs and self-employed retirement plans.
In the state's own words
Copied word for word from the official document linked below each quote:
“You may subtract the amount of federally taxed Social Security and retirement income included in your adjusted gross income on Form IL-1040, Line 1, that you received from”
“Individual Retirement Accounts or self-employed retirement plans reported on federal Form 1040 or 1040-SR, Line 4b.”
And Social Security?
No. Illinois lets you subtract the Social Security that is taxed on your federal return. The Illinois Social Security page quotes the rule.
Federal tax still applies
Whatever Illinois does, pensions, annuities and traditional IRA or 401(k) withdrawals are generally taxable on your federal return. See the federal tax brackets and, if you are 73 or older, the required minimum distribution calculator.
State rules change, and the details (age limits, income limits, which plans qualify) matter. Check with the Illinois Department of Revenue before you file or move.
Other states in the same group
Check our work
The answer above comes from this document. Follow the link and compare.
- Social Security benefits and certain retirement plansIllinois Department of Revenue. Read on November 12, 2026.