Illinois is one of only a handful of states that fully exempts retirement income from state tax — Social Security, pensions, 401(k), IRA. Moving to California means those exemptions disappear. Here is what that costs.
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Talk to a Specialist →Illinois retirees face the sharpest income tax increase of any buyer group moving to Sacramento. Illinois fully exempts Social Security, pension income, and IRA/401(k) distributions from state income tax — no matter how much you draw. California taxes all of it as ordinary income. This is not a nuance or an edge case. For a retiree drawing $80,000/yr in retirement income, the move from Illinois to California adds approximately $4,000–$6,000/yr in state income tax that was previously zero. That number belongs in your budget model.
Illinois exempts 100% of Social Security benefits, pension income from government and private employers, and IRA/401(k) distributions from state income tax. Illinois flat income tax rate is 4.95%, but retirement income is fully excluded, so most retirees pay zero Illinois state income tax on their retirement draws. California has no equivalent exemption. Social Security is partially taxable above federal thresholds. Pension income, IRA distributions, and 401(k) withdrawals are all taxed as ordinary income at California's graduated rates (1%–13.3%). Example: $80,000 in retirement income, all drawn from IRA and Social Security. Illinois state tax: $0. California state tax after standard deductions: approximately $60,000 taxable × 6% average effective rate = $3,600/yr. This $3,600/yr income tax increase is permanent and compounds over a 20-year retirement. Over 10 years: $36,000+ in additional state tax. It is a meaningful cost that no agent in Sacramento will surface proactively because it does not help them close the deal.
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Illinois property taxes are among the highest in the country — effective rates of 2.0%–2.5% in the Chicago suburbs and other major markets. Moving to Placer County at 1.12% represents a significant property tax reduction. Example: An Illinois home in Naperville assessed at $500,000 at 2.3% effective rate = $11,500/yr in property tax. A Sun City Roseville home at $520,000 at 1.12% = $5,824/yr. Annual property tax savings: $5,676/yr. That savings alone nearly covers the income tax increase. Additionally, Illinois homeowners selling in the Chicago metro area often carry substantial equity. A Chicago suburb home worth $700,000 purchased in the 2000s for $300,000 generates $400,000 in gain — partially sheltered by the $500,000 federal exclusion. The equity release funds retirement in a way that Illinois home values alone often cannot.
The property tax relief from moving from Illinois to Placer County is often the most compelling financial argument for this move. But it should be presented alongside the income tax increase, not instead of it. At $520K in Roseville versus $500K in Naperville, the property tax savings of ~$5,600/yr is roughly matched by the income tax increase of ~$4,000/yr, yielding a net financial change near zero. The lifestyle benefits — climate, equity release, proximity to Sierra Nevada and California amenities — become the actual decision driver once the tax wash is understood. Buyers who understand both numbers make better decisions than buyers who only heard the property tax argument from an agent.
Illinois buyers in Sacramento tend to buy in the mid-tier price range — Sun City Roseville and Sun City Lincoln Hills are the most common landing spots, with Heritage Placer Vineyards drawing Illinois buyers interested in new construction. Chicago suburb buyers with higher equity often target Esplanade at Turkey Creek or Trilogy at Bickford. Illinois buyers from downstate (Peoria, Springfield, Rockford) typically target the most affordable 55+ options: Sun City Roseville resale under $500K or Heritage Park in Sacramento City.
We can help you model the real cost change — income tax, property tax, HOA, and equity release — before you commit to any community.
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