Illinois does not tax Social Security or any other type of retirement income, which includes Social Security benefits, pensions, IRAs, and 401(k) distributions. However, the state has a flat income tax rate of 4.95%, meaning earnings from other sources such as investment income are taxable.
You may pay federal taxes on a portion of your Social Security benefits, depending on your income. For individual tax filers, up to 50 percent of benefits will be taxed if the total income is between $25,000 and $34,000. If your combined income is more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.
Illinois residents looking to apply for Social Security benefits should visit the local Social Security Administration office or use the online portal. When applying, applicants must provide accurate information and supporting documents, such as birth certificates and tax forms.
The processing time for Social Security applications can take between two to six months, so it is recommended to apply well before any deadlines.
The cost of living in Illinois is 8.2% lower than the national average, making it somewhat attractive for retirees. Although Illinois has one of the country’s highest average effective property tax rates at 2.23%, some retirees may be eligible for property tax exemptions, particularly seniors who are at least 65 years old. The eligibility for such exemptions, however, varies depending on the municipality.
According to the Social Security Administration, around 2.5 million people in Illinois receive Social Security benefits.