Illinois taxes gains at 4.95%, with one big exception
Illinois has a flat 4.95% individual rate and no lower rate for long-term gains. A $50,000 gain that adds the same amount to Illinois net income adds $2,475 of state tax before credits.
The exception is retirement money. Illinois exempts qualified retirement plan distributions, IRA withdrawals and Social Security from income tax, so gains realized inside a 401(k) or IRA are never taxed by Illinois, even when withdrawn. Gains in a taxable brokerage account get no such shelter.
Reconcile Illinois net income before applying 4.95%
The Illinois Department of Revenue’s current rate page lists 4.95% for individual income tax. It separately lists corporate and replacement-tax rates. Selecting a business percentage from the same table would misstate the individual investment sale modeled here. The taxpayer must be identified before applying any number.
Illinois’s taxable-income guidance starts with federal adjusted gross income and then applies Illinois additions and subtractions. That base is not interchangeable with the federal ordinary taxable income used to stack preferential gains below. Prepare the Illinois net-income amounts independently, including the relevant state adjustments and exemption treatment.
The prepared-base option calculates the difference between 4.95% of entered Illinois net income before and after the sale, before credits. Use the final-liability option when credits, sourcing or other return effects change. For example, an independently confirmed $10,000 increase in the Illinois base produces $495 before credits; it does not prove that a $10,000 gross sale price produces a $495 tax.
As a prepared-base illustration, Illinois net income of $50,000 produces $2,475 before credits, while $150,000 produces $7,425. Subtracting gives a $4,950 increase. These are assumed reconciled Illinois amounts. If the sale also changes an exemption or credit, recompute the return and use the final-liability mode rather than treating that illustration as a finished tax return.
Illinois preparation checklist
- Individual rate rather than corporate or replacement tax
- Illinois additions and subtractions
- Net-income comparison and any credit changes