State guide
Does Illinois tax retirement income? IRAs, Roth conversions and Social Security (2026)
By Secure Retirement PlannerUpdated
If you retire in Illinois, the state does not tax your Social Security, pensions or IRA withdrawals, so they skip the 4.95% state rate. Your traditional IRA to Roth conversion is free of state tax in 2026 too. The state's tax rules list it as retirement income you may subtract on your Illinois return.
You still owe federal tax on the conversion, and that is your main cost. Illinois exempts it at any age. So you have little state reason to wait for a move before you convert.
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The short version
- Illinois lets you subtract the federally taxed part of your traditional IRA to Roth conversion.
- You take the subtraction on Form IL-1040, Line 5, and attach federal return pages to back it up.
- You don't have to reach a certain age. Early payouts also qualify.
- A very large conversion can still cost you the Illinois exemption allowance, because that test uses your federal AGI.
- Federal tax, your Medicare IRMAA and tax on your Social Security still apply.
Does Illinois tax retirement income?
For most retirees, no. The state rate is 4.95%. But you can take your retirement income back off your Illinois return. That covers your Social Security, pensions, IRA and 401(k) payouts, and IRA to Roth conversions. Your interest, dividends and wages are still taxed.
| Income type | Taxed by Illinois in 2026? | Notes |
|---|---|---|
| Social Security | No | Subtracted on IL-1040, Line 5 |
| Public pensions | No | Government plans, including military, are subtracted |
| Private pensions | No | Subtracted if paid from a qualified employer plan |
| IRA and 401(k) withdrawals | No | Subtracted at any age, including early payouts |
| Roth conversions | No | Traditional IRA conversions are subtracted. For a conversion inside a 401(k), check with a state tax preparer |
Does Illinois tax a Roth conversion?
No. Illinois starts with your federal adjusted gross income, which includes the conversion. Then it lets you subtract qualified retirement income. The state's Publication 120 lists a traditional IRA to Roth IRA conversion as one of the IRA items you may subtract.
You subtract only the part that was federally taxed. Part of your conversion may be tax-free federally because of nondeductible contributions. That part was never in your income to begin with.
The Illinois income tax rate is 4.95% of net income. That rate has been in place since July 1, 2017. So the subtraction saves you about $49.50 for every $1,000 you convert, compared with a state that taxes it at that rate.
What retirement income does Illinois let me subtract?
Publication 120 says you can subtract the federally taxed part of these on IL-1040, Line 5:
| Type of income | Subtracted? |
|---|---|
| Traditional IRA distributions and IRA to Roth IRA conversions | Yes |
| 401(k) and other qualified employee benefit plans | Yes |
| SEP plans | Yes |
| Government retirement and disability plans, including military | Yes |
| State and local government 457 plans | Yes |
| Railroad retirement | Yes |
| Social Security reported on your federal return | Yes |
| Early distributions from qualified plans and IRAs | Yes |
Are there any Illinois catches on a big conversion?
Just one. You lose the Illinois exemption allowance ($2,850 per person for 2025) if your federal AGI is over $500,000 on a joint return. For single filers, the line is $250,000. Your federal AGI includes the conversion, even though Illinois later subtracts it.
This only matters if you have other income Illinois taxes, such as interest, dividends, capital gains or wages. If all your income is retirement income and Social Security, your Illinois tax is zero either way.
People also ask about 401(k) to Roth moves. Publication 120 names traditional IRA conversions directly and also covers 401(k) plan income. But it does not say anything separate about a Roth conversion inside a 401(k). If you are converting inside your employer plan, check the subtraction with an Illinois-licensed tax preparer.
Does it matter if I move into or out of Illinois the year I convert?
Not much for the conversion itself. If you live in Illinois for part of the year, you use Schedule NR. Its instructions say you include income from any source while you lived there. You then subtract federally taxed retirement income you got while you lived there.
Nonresidents don't include retirement income in the Illinois column at all. So a conversion before or after your move is generally free of Illinois tax.
The state you move to is another matter. Check its rules before you convert. For example, see California or Arizona if you're heading there.
What will the conversion cost me federally?
For most Illinois retirees, federal tax is the whole bill. In 2026, if you're married, the 12% bracket ends at $100,800 of taxable income. The 22% bracket ends at $211,400.
Medicare also counts it. A 2026 conversion raises the income used for your 2028 premiums. Use Roth conversion tax calculator to try your own numbers.
Example: a Naperville couple converting $50,000
Carol, 63, and Steve, 64, file jointly and haven't started Social Security. In 2026 they expect $100,000 of income from Steve's pension and IRA withdrawals, plus $3,000 of bank interest. They convert $50,000 from Carol's IRA.
Federally, their taxable income goes from $70,800 to $120,800. The conversion puts $30,000 in the 12% bracket and $20,000 in the 22% bracket. That adds about $8,000 in federal tax.
In Illinois, the pension, IRA withdrawals and conversion are all subtracted on Line 5. Their federal AGI of $153,000 is well under $500,000, so they keep the exemption allowance. Their Illinois tax doesn't change.
If you live in Illinois, you can size your conversion around federal brackets and Medicare alone. Illinois does not tax the conversion itself.
| Without conversion | With $50,000 conversion | |
|---|---|---|
| Federal AGI | $103,000 | $153,000 |
| Federal tax added by conversion | about $8,000 | |
| Illinois retirement subtraction (Line 5) | $100,000 | $150,000 |
| Illinois tax added by conversion | $0 |
Hypothetical example. Assumes married filing jointly, both under 65, no Social Security, the 2026 federal standard deduction ($32,200) and 2026 brackets (IRS Rev. Proc. 2025-32), and a conversion from a traditional IRA. The $3,000 of interest stays taxable in Illinois in both columns. It ignores Medicare IRMAA. Your numbers will differ.
Common questions
Does Illinois tax Roth conversions?
No. Illinois Publication 120 lists your traditional IRA to Roth IRA conversion as retirement income you can subtract on Form IL-1040, Line 5.
Do I have to be a certain age for the Illinois subtraction?
No. Publication 120 says you can also subtract early payouts from qualified plans and IRAs.
Does Illinois tax Social Security?
No. The federally taxed part of your Social Security is subtracted on the same line as retirement income.
Where do I claim the subtraction?
On Form IL-1040, Line 5, for federally taxed Social Security and retirement income. Attach the federal pages that show your income.
Is a 401(k) to Roth conversion also exempt in Illinois?
401(k) payouts are on the Illinois list of income you can subtract. Roth conversions inside the plan aren't described separately, so check yours with an Illinois-licensed preparer.
Is there any Illinois downside to a large conversion?
Only one we found. Federal AGI over $500,000 (joint) or $250,000 (single) removes your Illinois exemption allowance. That matters if you have other income Illinois taxes.
Sources
Facts on this page were last checked on November 9, 2026.
- Illinois Department of Revenue, Publication 120, Retirement Income (December 2025) · Subtractable retirement income, including IRA to Roth conversions. Read Nov 9, 2026.
- Illinois Department of Revenue, Income tax rates · 4.95% individual rate, effective July 1, 2017. Read Nov 9, 2026.
- Illinois Department of Revenue, 2025 Form IL-1040 Instructions · Exemption allowance and federal AGI income limits. Read Nov 9, 2026.
- Illinois Department of Revenue, Schedule NR Instructions · Part-year and nonresident treatment of retirement income. Read Nov 9, 2026.
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments) · 2026 federal brackets and standard deduction. Read Nov 9, 2026.
Who wrote this
This guide was written and fact-checked by the Secure Retirement Planner editorial team using IRS, CMS and Social Security sources listed above. We update guides when the law or yearly limits change. How we research.