Illinois Capital Gains Tax Rate (2026)
Illinois capital gains tax overview
Illinois has a flat 4.95% income tax. Capital gains are taxed the same as ordinary income.
Federal + Illinois combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what an Illinois investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | Illinois State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 4.95% | 4.95% | 8.8% |
| 15% | 4.95% | 19.9% | 23.8% |
| 20% | 4.95% | 24.9% | 28.8% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — Illinois does not have an equivalent.
How Illinois compares to other states
Illinois's top rate of 4.95% places it in the lower-middle tier of state capital gains taxation. For comparison:
- Zero-tax states (FL, TX, NV, etc.): 0% — total with 15% federal = 15%
- Low-rate states (AZ, IN, PA): 2.5–3.1% — total with 15% federal = 17.5–18.1%
- Illinois: 4.95% — total with 15% federal = 19.9%
- High-rate states (NY, NJ): 10.75–10.9% — total with 15% federal = ~26%
- California: 13.3% — total with 15% federal = 28.3%
Tax-reduction strategies for Illinois residents
With a top state rate of 4.95%, minimizing capital gains tax is particularly important in Illinois. Key strategies:
- Hold over 1 year for long-term federal rates (0/15/20%). Illinois does not offer a preferential state rate, but federal savings alone are often 7–17%.
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving up to 25% ($4,990) on that $20,000 at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. You still owe Illinois state tax, but eliminating the federal component is significant.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
- Installment sales: If selling a business or real estate, structuring as an installment sale spreads the gain over multiple years, potentially keeping each year's gain in a lower bracket.
Detailed Illinois capital gains tax rules
Tax history and legal basis
Illinois taxes capital gains as ordinary income at a flat rate of 4.95%. The state has had a flat tax since 1969, protected by the state constitution.
Exemptions and special treatment
Illinois does not offer a preferential capital gains rate. All gains — short-term and long-term — are taxed at the same 4.95% flat rate. There are no exclusions for investment gains. However, retirement income (Social Security, pensions, 401k/IRA distributions) is fully exempt from Illinois income tax.
Filing requirements
File Form IL-1040 (resident). Illinois starts with federal AGI. The state also imposes two additional flat taxes: 1.0% for municipalities (where applicable) and various local surcharges in Cook County/Chicago. Filing deadline is April 15.
Recent changes and legislative updates
A 2020 ballot measure to switch Illinois to a progressive income tax (with rates up to 7.99%) was defeated by voters, keeping the flat 4.95% rate. Chicago and Cook County impose additional taxes that can add 1-2% for residents there.
Worked example: $50,000 capital gain in Illinois
Here's exactly what an Illinois resident would owe on a $50,000 long-term capital gain with $80,000 in other income (single filer, 2026):
| Component | Amount | Notes |
|---|---|---|
| Capital gain | $50,000 | Long-term (held over 1 year) |
| Federal tax (15%) | −$7,500 | Based on $80,000 ordinary income + gain |
| Illinois state tax (4.95%) | −$2,475 | Applied to the full gain amount |
| Total tax owed | −$9,975 | Federal + state combined |
| You keep | $40,025 | 80.0% of your gain |
After both federal and Illinois state tax, you keep $40,025 of your original $50,000 gain. The effective combined rate is 20.0%.
Frequently asked questions — Illinois
Does Illinois tax short-term and long-term gains differently?
No — Illinois taxes both short-term and long-term capital gains as ordinary income at the same rates as wages. There is no state-level preferential rate for patience. The federal system, however, taxes long-term gains at 0/15/20% vs. up to 37% for short-term — a significant difference that applies regardless of state.
Do I need to file an Illinois tax return if I only have capital gains?
If you have capital gains income and meet Illinois's filing threshold, you are required to file an Illinois state income tax return. The threshold is typically similar to the standard deduction amount — check the IL Department of Revenue for the current year's filing requirements.
What if I moved to Illinois mid-year?
If you moved to Illinois during the year, you are a part-year resident. Illinois generally taxes capital gains realized while you were an Illinois resident. Gains realized before you moved may be taxable by your prior state. Keep detailed records of when each sale occurred relative to your move date.