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 a 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.
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 a 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 a 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 a 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.