Understanding Your Illinois Paycheck in 2025
Living and working in Illinois means dealing with a unique tax situation. Unlike the federal government's progressive brackets, Illinois uses a flat tax rate of 4.95% on net income. This sounds simple on paper, but when you mix in federal withholdings, FICA taxes, and pre-tax deductions like 401(k)s, your actual take-home pay can be surprising.
Whether you're starting a new job in Chicago, getting a raise in Springfield, or just trying to budget better, our 2025 Illinois Paycheck Calculator breaks down every penny. We've updated this tool with the latest 2025 tax parameters, including the **$2,850 personal exemption allowance** and new Social Security wage bases.
2025 Key Updates:
- IL State Tax Rate: Remains flat at 4.95%.
- Personal Exemption: Using the 2025 allowance of $2,850 per exemption.
- Social Security Wage Base: Increased to $176,100 (up from $168,600).
- 401(k) Limit: Increased to $23,500 (plus catch-up contributions).
Where Does Your Money Go? The Breakdown
Federal Income Tax
This is usually your largest deduction. It's calculated based on your filing status (Single, Married, etc.) and your taxable income. The U.S. uses a progressive system, meaning you pay higher rates on income that falls into higher brackets—ranging from 10% to 37%.
Illinois State Income Tax (4.95%)
Illinois makes it relatively straightforward: you pay 4.95% on your net income. "Net income" here roughly means your Adjusted Gross Income (AGI) minus your personal exemptions.
Example: If you have $50,000 in taxable income, your state tax is simply $50,000 × 0.0495 = $2,475.
FICA Taxes (Social Security & Medicare)
These are mandatory federal payroll taxes.
- Social Security: 6.2% of your first $176,100 in earnings.
- Medicare: 1.45% of all earnings (no limit), plus an extra 0.9% surtax for high earners (over $200k).
Smart Ways to Keep More of Your Paycheck
Maximize Pre-Tax Contributions
Contributions to a 401(k), 403(b), or HSA are deducted from your gross pay before taxes are calculated.
Check Your Withholding (W-4)
If you regularly get a huge refund, you're giving the government an interest-free loan. Use form IL-W-4 to adjust your state allowances if you have dependents.
Real Life Scenario: "Middle-Class Mike"
Mike lives in Peoria, IL. He is Single, earns $60,000/year, and contributes 5% to his 401(k).
Inputs
- Gross Pay: $2,307.69 (Bi-weekly)
- 401(k): $115.38 (5%)
- Taxable Gross: $2,192.31
Taxes Withheld
- Federal: ~$195
- FICA: $176.54
- IL State (4.95%): $108.52
- Net Pay: $1,712.25
*Estimates for illustration only. Actual withholding may vary based on exact W-4 settings.
How to Read Your Illinois Pay Stub
Your pay stub (or earnings statement) is more than just a receipt for your direct deposit. It is a legal document that tracks your income, taxes, and benefits. Understanding the terminology is crucial for verifying that you are being paid correctly.
1. Gross Pay vs. Net Pay
Gross Pay is the big number at the top—your hourly rate multiplied by hours worked, or your salaried amount for the period. Net Pay is what lands in your bank account after the government and your employer take their share.
2. Tax Withholdings (The "Big Three")
- FED TAX (FIT): Federal Income Tax. This varies based on your W-4 form.
- IL STATE TAX (SIT): Illinois Income Tax. Almost always a flat 4.95% of your taxable income.
- OASDI/MEDICARE: Social Security (6.2%) and Medicare (1.45%). These are flat rates mandated by federal law (FICA).
3. Pre-Tax vs. Post-Tax Deductions
Knowing the difference can save you money.
- Pre-Tax: 401(k), 403(b), Health Insurance (usually), HSA, FSA. These lower your taxable income, meaning you pay less tax.
- Post-Tax: Roth 401(k), Roth IRA, Wage Garnishments, Union Dues (often). These come out after taxes are calculated, so they don't lower your tax bill today (though Roth accounts grow tax-free).
Illinois Labor Laws: Are You Being Paid Enough?
Illinois has some of the strongest worker protections in the Midwest. It is important to ensure your paycheck reflects these legal requirements.
UpdateMinimum Wage
As of January 1, 2025, the Illinois minimum wage increased to $15.00 per hour for non-tipped workers. For tipped workers, the base wage is 60% of the regular minimum wage ($9.00/hour), but employers must make up the difference if tips + base wage don't equal $15.00.
RuleOvertime Pay
Illinois follows federal FLSA guidelines. Non-exempt employees must be paid 1.5x their regular rate for any hours worked over 40 in a single workweek. Employers cannot average hours over two weeks to avoid paying overtime.
BenefitPaid Leave
Under the "Paid Leave for All Workers Act" (PLAWA), most Illinois employees earn 1 hour of paid leave for every 40 hours worked, up to 40 hours per year. This leave can be used for any reason, not just sickness.
LawPay Frequency
Generally, Illinois employers must pay their employees at least semi-monthly (twice a month) or bi-weekly. Executive, administrative, and professional employees may be paid once a month.
Illinois Property Taxes: The Silent Budget Killer
While the 4.95% flat income tax rate seems reasonable, Illinois residents often face a different financial challenge: property taxes. Illinois serves as a classic example of the "three-legged stool" of state taxation (income, sales, and property tax). Since income tax is constitutionally mandated to be flat, local governments rely heavily on property levies.
Budgeting for the "Second Mortgage"
Illinois consistently ranks with the second-highest property tax rates in the nation (often behind only New Jersey). The average effective rate is around 2.23%, but this can spike to over 3% in certain Chicago suburbs.
Example: A home worth $300,000 in Illinois might come with a $6,700/year tax bill. In a neighboring state like Indiana (~0.85%), that same home might only cost $2,550 in taxes.
*When calculating your take-home pay budget, always factor in an escrow buffer for rising property taxes.
Frequently Asked Questions
Is the Illinois tax rate strictly 4.95%?
Yes, for individuals, trusts, and estates, Illinois mandates a flat income tax rate of 4.95%. Unlike the federal system or some other states, income is not taxed at progressive rates that increase as you earn more. This makes calculating your state liability relatively simple.
Does Illinois tax retirement income?
Generally, no! Illinois is one of the few states that does not tax most retirement income. This includes Social Security benefits, pension income, and distributions from 401(k)s and IRAs, provided they are qualified retirement plans. This makes Illinois a tax-friendly state for retirees despite high property taxes.
What is the "Reciprocal Agreement"?
Illinois has reciprocal tax agreements with Iowa, Kentucky, Michigan, and Wisconsin. If you live in one of these states but work in Illinois, you can file Form IL-W-5-NR with your employer to be exempt from Illinois withholding. Instead, you will pay income tax to your home state.
How do personal exemptions work in 2025?
For the 2025 tax year, the personal exemption allowance is typically $2,850 (adjusted for inflation) for you and each of your dependents. This amount is subtracted from your net income before the 4.95% tax is applied. Note that high earners (AGI over $250k for singles, $500k for joint) may lose this exemption.
Why is my take-home pay lower than expected?
Common culprits include:
1. Benefits: Deductions for health insurance, life insurance, or disability.
2. Retirement: High 401(k) contributions (a good thing for your future!).
3. Over-withholding: You might be claiming 0 allowances on your W-4 when you should claim 1 or more, resulting in a large refund later but smaller checks now.