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Illinois Taxes: What You Need to Know

Illinois follows a simple tax system with a flat tax rate for all income levels. While Illinois does not have local income taxes, there are some local property and sales taxes depending on where you live.

Federal, State, and Local Tax Withholding in Illinois in 2024

Federal Income Tax in Illinois:

The federal tax withholding system in Illinois follows the national guidelines set by the IRS, with tax rates that are progressive. This means the rate of taxation increases as income rises. For 2024, the federal tax brackets for individual filers are as follows:

• 10%: For incomes up to $11,000
• 12%: For incomes between $11,001 – $44,725
• 22%: For incomes between $44,726 – $95,375
• 24%: For incomes between $95,376 – $182,100
• 32%: For incomes between $182,101 – $231,250
• 35%: For incomes between $231,251 – $578,125
• 37%: For incomes over $578,125

Federal tax brackets vary based on filing status (e.g., Single, Married Filing Jointly, Head of Household), meaning married couples or individuals filing jointly, as well as heads of households, may have different thresholds for each bracket. Federal tax withholding is calculated based on your income and W-4 form, which determines your withholding allowances and filing status.

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Illinois State Income Tax:

Illinois stands out for having a flat income tax rate of 4.95%. This means that all residents, regardless of income level, pay the same percentage of their taxable income to the state. Unlike the federal tax system, which employs progressive brackets that charge higher rates for higher earners, Illinois’ flat tax system makes tax calculations straightforward. Whether you earn $50,000 or $500,000, you will be taxed at 4.95% on all your taxable income.

For example:

• If you earn $60,000 annually, you would pay $2,970 in state income tax.
• If you earn $150,000, your tax liability would be $7,425.

There are no personal exemptions in Illinois, and most forms of income, including wages, salaries, bonuses, and self-employment income, are subject to this tax.

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Local Taxes in Illinois:

While Illinois does not impose local income taxes on residents, property and sales taxes are significant sources of local revenue.

1. Property Taxes:

Illinois has some of the highest property taxes in the U.S., with an average effective property tax rate of 2.16%. This rate varies by county, with some areas, like Cook County, being known for particularly high rates. These taxes are collected by local governments and are used to fund schools, infrastructure, and public services.

For instance:

• On a home valued at $300,000, the annual property tax could be around $6,480 based on the state average.

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2. Sales Taxes:

Sales taxes in Illinois consist of a statewide base rate of 6.25% plus additional local sales taxes that can bring the total rate up significantly depending on the jurisdiction. In areas like Chicago, combined state and local rates can reach 10.25%. On average, Illinois’ combined state and local sales taxes come to 8.82%.

For example:

• If you purchase goods worth $1,000, you could pay anywhere from $62.50 to $102.50 in sales tax, depending on your location.

Although there are no local income taxes, the relatively high property and sales taxes can significantly impact residents’ overall tax burden.

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FICA & State Insurance Taxes in Illinois in 2024

1. FICA Taxes:

FICA taxes are applicable nationwide and consist of:

• Social Security Tax:
  • 6.2% on wages up to the wage base limit, which is $168,600 in 2024. Any income above this threshold is not subject to Social Security tax.
• Medicare Tax:
  • 1.45% on all wages with no wage base limit.
  • An additional 0.9% Medicare surtax applies to individuals earning over $200,000 and married couples filing jointly with incomes over $250,000.

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2. State Unemployment Insurance (SUI):

• Illinois employers are required to pay into the state’s unemployment insurance fund, but this tax is not deducted from employee wages. The current rate for Illinois employers varies depending on the employer’s specific unemployment experience and ranges from 0.525% to 6.925% on wages up to a specific wage base (typically set annually by the state). 

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Pre-Tax Deductions (Medical Insurance, 401K, etc.) in Illinois in 2024

Pre-tax deductions allow you to reduce your taxable income, which lowers your tax burden. Common pre-tax deductions include:

1. Health Insurance Premiums:

• Employee contributions to health insurance plans through an employer can typically be deducted before taxes, reducing your taxable income. This includes medical, dental, and vision insurance premiums.

2. 401(k) and Retirement Contributions:

• Contributions to retirement accounts like 401(k) or 403(b) are also made pre-tax. The maximum contribution limit for 2024 is expected to be $23,000 for individuals under 50, and an additional $7,500 catch-up contribution for those 50 and older.

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3. Health Savings Accounts (HSA):

HSAs are available to individuals with a high-deductible health plan (HDHP). In 2024, the IRS has set the annual contribution limit for HSAs at $4,150 for individuals and $8,300 for families. For individuals aged 55 and older, an additional “catch-up” contribution of $1,000 is allowed. Contributions to an HSA are tax-deductible, and distributions used to pay for qualified medical expenses are tax-free. 

4. Flexible Spending Accounts (FSA):

FSAs allow employees to set aside pre-tax income for medical or dependent care expenses. For 2024, the maximum contribution limit for a healthcare FSA is $3,050.

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2024 Illinois Tax Table Example

These sections provide an in-depth look at how taxes and pre-tax deductions work in Illinois for 2024. For more details, check out official state resources like the Illinois Department of Revenue or federal resources such as the IRS website.

Median Household Income in Illinois (2024)

The median household income in Illinois is projected to be around $80,306 in 2023, continuing a trend of modest growth. This level reflects the influence of Illinois’ strong economic sectors, such as finance, healthcare, and manufacturing, particularly in urban areas like Chicago.

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Income levels in Illinois are generally above the national average, driven by the economic activity in the Chicago metro area and other urban regions, while rural areas experience more modest income levels. This urban-rural divide affects overall income distribution within the state.

Illinois Tax Brackets 2024

Unlike many other states, Illinois has a flat tax system. This means that regardless of income level, every resident pays the same tax rate of 4.95% on their taxable income.

Local taxes in Illinois vary greatly depending on where you live, primarily due to property and sales taxes. Property tax rates in Illinois are among the highest in the country, averaging 2.16%. Sales taxes also vary based on location, with an average combined state and local rate of 8.82%.

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