How an Illinois paycheck works
Illinois taxes income at a single flat rate, and the state constitution requires it: a graduated income tax needs a constitutional amendment, and the one put to voters in 2020 failed. The withholding calculation is correspondingly simple. The employer works out the employee's exemptions from Form IL-W-4, subtracts them from the wage, and multiplies the remainder by the flat rate. Filing status plays no part: single, married and head of household are all taxed identically, which is unusual among the states.
Federal income tax withholding
Federal withholding annualises the wage, subtracts the standard deduction that matches the filing status on Form W-4 Step 1, applies the graduated schedule for that status, and deducts the dependent credit from Step 3. This page models a W-4 with Steps 2 and 4 left blank: one job, no spouse income, no other income, no extra withholding. Above the income limit for the status, the dependent credit tapers by a set amount for every thousand dollars of excess rather than disappearing at a cliff.
Social Security and Medicare
Social Security applies a flat rate to wages up to an annual ceiling that is re-indexed each year, so it stops partway through the year for a high earner. Medicare applies to every dollar, and above a fixed wage threshold the employer withholds the Additional Medicare tax on the excess, with no employer match and no regard for filing status.
Illinois withholding and Form IL-W-4
Form IL-W-4 has two allowance lines. Line 1 covers the basic allowances an employee claims for themselves and their dependants, and each one is worth the standard exemption amount published each year in Booklet IL-700-T. Line 2 covers additional allowances for age and blindness, and each of those is worth a smaller fixed amount. The two are added together, subtracted from the annual wage, and what remains is taxed at the flat rate. There is no standard deduction on top of the allowances, and no tax credit is applied at the withholding stage.
An employee who claims no allowances is simply taxed on the whole wage. Because the rate never changes with income, the Illinois line on this page rises in a straight line, and the only reason the effective rate moves at all is the allowance that stays fixed while the wage grows.
Local income tax
No Illinois municipality levies an income tax on wages, Chicago included. Chicago has at times taxed employers on their headcount, but nothing is withheld from the employee at city level, so the state line is the whole of the state and local income tax burden.
What the employer pays on top
The employer matches Social Security and Medicare and pays federal unemployment tax at its net rate. Illinois unemployment insurance is an employer contribution at an experience-rated percentage on a state wage base, so it varies by company and is not shown. Illinois does not take an unemployment contribution from employees.
What this calculator assumes
The figure models a salaried employee paid evenly across the year with a standard Form W-4 and state certificate, and no pre-tax deductions. It leaves out:
- Pre-tax contributions such as a 401(k), health premiums, HSA or flexible spending accounts, which reduce the wages subject to income tax and often to FICA.
- Extra withholding requested on the federal or state certificate, and the W-4 Step 2 and Step 4 adjustments.
- Bonuses and other supplemental wages, which may be withheld at a flat supplemental rate.
- Employer-side state unemployment insurance, which is priced per employer, and any federal unemployment credit reduction.
- Employees outside the normal Social Security system, such as some public-sector staff and certain visa holders.
Withholding versus your final tax bill
Withholding is a prepayment. The annual returns, federal and state, replace these standard assumptions with your real situation: itemised deductions, other income, and credits payroll knows nothing about. One job usually produces a refund; two jobs, a working spouse or investment income often produce a balance due.