The number that decides your Illinois income tax is your Illinois net income—not your gross pay, federal taxable income, or the amount your employer withheld. For a 2025 return, you start with federal adjusted gross income, make Illinois-specific adjustments, subtract the exemption you qualify for, apply the state rate, then account for credits and payments.
I’ll use tax year 2025 for the main calculation because Illinois has issued final instructions for that return. The main rules come from the Illinois Income Tax Act, enacted by the General Assembly: 35 ILCS 5/201 imposes the tax, 35 ILCS 5/203 defines individual base income, and 35 ILCS 5/204 provides the standard exemption. The Illinois Department of Revenue’s annual IL-1040 instructions explain how to report those rules on the return; the instructions are agency filing guidance, not statutes.
The calculation in one line
For a full-year Illinois resident, the basic sequence is:
- Start with federal adjusted gross income.
- Add Illinois additions and subtract Illinois subtractions to reach Illinois base income.
- Subtract your allowed Illinois exemptions to reach Illinois net income.
- Multiply net income by 4.95% for the 2025 tax year.
- Subtract allowed credits, add any other tax reported on the return, and compare the result with withholding and payments already made.
The result of the last step is your balance due or overpayment. It is different from your total Illinois tax liability: a taxpayer can owe tax for the year but still receive a refund if withholding and payments were greater.
Step 1: Decide which income Illinois can tax
If you lived in Illinois for all of 2025, Illinois generally starts with your income from all sources. If you were a nonresident for the whole year, Illinois generally taxes only income sourced to Illinois. A part-year resident generally reports income from all sources received while an Illinois resident, plus Illinois-source income received while a nonresident. Use Schedule NR and its instructions for the nonresident or part-year calculation; don’t simply multiply all your income by the number of days you lived here.
For example, a person who moved from Indiana to Illinois during the year may have to allocate wages and other income between the two residency periods. The source of the income matters too. A temporary absence from Illinois does not by itself make you a part-year resident.
There is a special rule for employee wages earned by residents of Iowa, Kentucky, Michigan, or Wisconsin who work in Illinois: reciprocal agreements generally keep those wages from being taxed by Illinois. The employee usually files Form IL-W-5-NR with the employer to stop Illinois withholding. If Illinois tax was withheld from wages covered by reciprocity, the usual remedy is to request a refund from Illinois, not to treat the withholding as tax owed.
Step 2: Start with federal adjusted gross income, then adjust it for Illinois
Enter federal adjusted gross income from your federal return on Form IL-1040, Line 1. If you were not required to file a federal return, Illinois still instructs you to use a federal Form 1040 as a worksheet to determine adjusted gross income. The state then applies its own additions and subtractions to determine Illinois base income. The 2025 IL-1040 instructions for income and the base-income instructions list the lines and supporting schedules.
This is where a common calculation goes off course: Illinois does not start with federal taxable income. So, in general, don’t take your federal taxable-income figure and subtract your federal standard or itemized deduction again on the Illinois return. Start with federal adjusted gross income and make only the Illinois adjustments the form allows.
Some adjustments are common. Illinois generally allows a subtraction for federally taxed Social Security and qualifying retirement income, but the type of distribution matters. The return also requires certain additions, including some income excluded from federal adjusted gross income, such as federally tax-exempt interest. Certain 529 or ABLE account transactions can also require an addition or subtraction. Check the applicable Schedule M instructions rather than treating every item in one category as automatically taxable or exempt.
Step 3: Subtract the Illinois exemption you are allowed
For tax year 2025, the standard personal exemption amount is $2,850 per eligible exemption. A married couple filing jointly generally starts with $5,700 for the two taxpayers; an eligible dependent exemption is figured separately using Schedule IL-E/EITC. The exemption reduces income before tax is calculated—it is not a credit that directly reduces the tax bill.
The exemption is subject to limits. For 2025, a taxpayer generally cannot claim it when federal adjusted gross income is greater than $250,000 for a single, head-of-household, married-filing-separately, or widowed return, or greater than $500,000 for a joint return. The rules also restrict the personal exemption for someone claimed as another taxpayer’s dependent when that person’s Illinois base income is above the applicable basic amount. Follow the 2025 exemption instructions for your filing status and household.
A taxpayer or spouse who was at least 65 by the end of the tax year may qualify for an additional $1,000 exemption; an additional $1,000 may also be allowed for a legally blind taxpayer or spouse. Those amounts are subject to the return’s instructions and eligibility rules. If your income is near an exemption limit, use the table in the instructions instead of assuming the full exemption applies.
Step 4: Apply the flat rate
Illinois uses a flat individual income tax rate. For 2025, the rate is 4.95%. Multiply Illinois net income—not gross wages or federal adjusted gross income—by 0.0495. Illinois residents enter that calculation on Form IL-1040. Nonresidents and part-year residents use Schedule NR to determine the tax attributable to Illinois.
The rate and exemption change by tax year, so make sure you are using the return for the year of the income. For 2026, Illinois has announced a 4.95% rate and a $2,925 personal exemption amount. Those 2026 figures are for 2026 income and estimates; they do not replace the 2025 amounts on a 2025 return.
Step 5: Apply credits and add other tax
After the initial tax calculation, check for credits you can actually claim. Common individual credits include a credit for qualifying Illinois property taxes paid on your principal residence, certain K-12 education expenses, and income tax paid to another state on income also taxed by Illinois. A credit for tax paid to another state is generally for Illinois residents or part-year residents, not full-year nonresidents. You must meet the credit rules and complete the relevant schedule; withholding by another state does not automatically establish that the credit is allowed.
Illinois also offers credits through Schedule 1299-C for taxpayers who meet specific program requirements. The Illinois Earned Income Tax Credit and, for qualifying families, the Child Tax Credit are reported as refundable credits. Nonrefundable credits, by contrast, generally cannot reduce the tax below zero. The state’s instructions for credits identify the applicable schedules and limits. For example, the property-tax and K-12 education credits have federal-AGI limits; the volunteer emergency worker credit has a different rule.
Then include any other amounts the return requires, such as a recapture of a previously claimed investment credit or Illinois use tax. Use tax is not income tax, but it can increase the amount due on the same return when it applies.
Step 6: Subtract what you already paid
Count Illinois income tax withheld from your W-2s and 1099s, estimated tax payments, any extension payment, and qualifying pass-through withholding shown on a Schedule K-1-P or K-1-T. Include refundable credits where the form directs. The payment instructions explain which amounts belong on each line.
After the return totals tax, credits, other tax, and payments, compare the two totals. If payments and refundable credits exceed the amount due, you have an overpayment. If the amount due is larger, the difference is your balance to pay. That is the figure most people mean when they ask what they owe.
A simple example
Suppose a single Illinois resident has $70,000 of federal adjusted gross income for 2025, no Illinois additions or subtractions, and qualifies for the $2,850 personal exemption. Net income is $67,150. Multiplying by 4.95% gives approximately $3,324 of tax before credits. If the taxpayer has $500 of allowed nonrefundable credits and $3,100 in withholding and estimated payments, the remaining result is a $276 refund, assuming no other tax or refundable credits. If payments were only $2,500, the same assumptions would produce a $324 balance due instead.
Keep the paperwork that supports the math
Have your federal return, W-2s, 1099s, Illinois withholding records, estimated-payment confirmations, and any pass-through K-1 forms in front of you. If you moved, keep dates and records showing when you lived in Illinois and where work was performed. If you claim a credit, keep the property-tax bill, education-expense records, or the other state’s return and payment records that support it. Illinois forms round amounts to whole dollars as directed; add amounts with cents first and round the total rather than rounding every receipt separately.
If you expect to owe more than $1,000 after withholding, pass-through withholding, and credits, you may have to make estimated payments during the year. The timing of payments matters, so a large payment with the return may not erase an estimated-payment penalty for earlier missed installments. Review Form IL-2210 if you had substantial self-employment, investment, or other income without withholding.
Timing matters if you are filing now
The original deadline to file and pay a 2025 Illinois individual return was April 15, 2026. Illinois allowed an automatic extension to file through October 15, 2026, but the extension did not extend the time to pay. As of October 19, 2026, both dates have passed. If you have not filed, a late-filing penalty may apply; unpaid tax can also carry a late-payment penalty and interest from the original payment deadline. Filing and paying what you can promptly is generally better than leaving the return unfiled. See the Department’s due-date and extension page and individual payment options for current instructions.
Disclaimer: This guide provides general legal information and is not legal advice. Laws vary by state and may change over time. The outcome of any legal issue depends on the specific facts, documents, and circumstances involved. For advice about your situation, consult a qualified attorney licensed in your jurisdiction.