How Illinois Taxes Retirees (Blog)

Believe it or not, from a pure income tax perspective, it’s going to be hard to beat Illinois. Yes, I did just say that.

Illinois is VERY favorably in taxing income. In fact, the state does not tax ANY retirement income. So, if you’re income consists of $50k in IRA Distributions, $25k in Social Security and $25k in pension, you hav 0 income tax.

Now, don’t get me wrong. Illinois does get you in other perspectives. Sales tax and property tax are not low. In fact, those two areas are among the highest in the Union.

Unfortunately, of the 3 taxes, Income, Sales and Property, I’d rather have your income tax the higher of the three. You can manipulate your income so much easier than your sales and property tax.

So, while Illinois is favorable for income tax, it would be hard to recommend moving there for a soon-to-be retiree.

But with that said, it’s not nearly as bad, tax-wise, than what may be commonly thought. At least not for those whose income mainly comes from retirement accounts.

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