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Illinois uses a flat income tax rate of 4.95% for all income levels — it doesn't matter if you earn $30,000 or $300,000, everyone pays the same percentage. There is no local city income tax in Chicago or other Illinois cities. There is a personal exemption of $2,425 per taxpayer.

No. Illinois does not tax Social Security retirement benefits, pension income, or retirement distributions (401k, IRA). This makes Illinois relatively favorable for retirees. However, you still pay 6.2% Social Security and 1.45% Medicare (FICA) taxes on earned income while working.

Pre-tax deductions like 401(k), HSA, and FSA contributions reduce your taxable income before federal and state taxes are calculated. For example, $6,000 in 401(k) contributions saves roughly $297 in Illinois taxes (6000 × 4.95%) plus federal taxes based on your bracket.