Illinois exempts Social Security, pensions, IRA distributions, and 401(k) withdrawals from state income tax entirely — no cap, no age threshold, no income limit. It's one of the most generous retirement income tax policies in the country. It's also sitting next to some of the highest property tax rates in the country, and the two facts are not a coincidence.
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Talk to a Specialist →A retiree who researches only the income tax side sees an unusually good deal. A retiree who researches only the property tax side sees one of the worst in the country. Neither view is complete — the honest picture is that Illinois collects its revenue almost entirely through property tax rather than income tax, which is genuinely better for some retirees and genuinely worse for others depending on how much of your net worth sits in a home versus a retirement account.
Illinois counties don't just have different tax rates — some use entirely different assessment ratios. Cook County assesses residential property at 10% of market value, unique among the eight counties in this market. Kane County assesses at 33.33% of market value. A "rate" quoted for one county isn't directly comparable to a rate quoted for another without knowing which assessment ratio it's being applied against — two numbers that look similar on paper can produce very different actual tax bills.
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| County | Effective rate range | Note |
|---|---|---|
| DuPage | ~1.8%–2.2% | Lowest effective rates in the metro |
| Cook | ~2.0%–2.5% | Assessed at 10% of market value — unique in Illinois |
| Will | ~2.0%–2.5% | Broad range by township and municipality |
| McHenry | ~2.0%–2.4% | Exurban, slightly below Lake County |
| Kane | ~2.2%–2.6% | Assessed at 33.33% of market value |
| DeKalb | ~2.1%–2.5% | Most affordable market-edge communities |
| Kendall | ~2.3%–2.7% | Growing Oswego/Yorkville corridor |
| Lake | ~2.2%–2.8% | Highest effective rates in the market |
Notice that even the "lowest" county in this market, DuPage at roughly 1.8%–2.2%, still runs well above the national median of about 1.0%. Illinois doesn't have a genuinely low-tax corner the way some multi-county markets in this guide do — the honest expectation to set is "meaningfully high everywhere, with modest variation," not "shop around until you find something cheap."
The honest way to evaluate Illinois: if the bulk of your retirement income comes from Social Security, a pension, or account withdrawals, the zero-income-tax treatment is a real, durable, uncapped benefit that few states match. If most of your net worth is tied up in the home itself, the property tax side of the ledger is where you'll actually feel Illinois's revenue structure — run both numbers together, not the flattering one alone.
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