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What You Need to Know About the Illinois Estate Tax

The Illinois estate tax rate is graduated and goes up to 16%. It is applied on estates worth more than $4 million. If you live in the Prairie State and are thinking about estate planning, you’ve come to the right place. This guide will walk you through what you need to know about estate tax in Illinois. If you think you need help with estate planning, you may want to consider working with a financial advisor. SmartAsset’s financial advisor matching service can help you find an advisor that’s a good fit for you.

Illinois Estate Tax Exemption

The estate tax threshold for Illinois is $4 million. This means that if you die and your total estate is worth less than $4 million, the estate won’t owe anything to the state of Illinois. If your estate is worth more than $4 million, though, there is a progressive estate tax rate for all wealth your estate will have to pay before money can be dispersed to your heirs.

Unlike some other states, the Illinois exemption is not portable between spouses, so when both people in a married couple have died the exemption is still $4 million.

Illinois Estate Tax Rate

What You Need to Know About the Illinois Estate Tax

The estate tax rate for Illinois is graduated and the top rate is 16%. Remember that in Illinois, you pay taxes on the entire estate if it is above the $4 million threshold.

Find your taxable estate bracket in the chart below. The second column, Base Taxes Paid, shows what you owe on money that falls below your bracket. Then figure out how much of your estate falls above the lower limit of your bracket. Multiply that number by the marginal rate, add it to the base rate and you’ll know your estate tax burden.

Here’s an example. Let’s say your total estate is worth $5.5 million. First, you deduct $60,000 (per the Illinois Secretary of State), leaving an adjusted taxable estate of $5,440,000. Using the tax table below, you see that the base tax for this bracket is $402,800. The rate of 12% applies to the $400,000 above that amount, which comes to $48,000. If you add that to the base rate, the total tax is $450,800. Note that this number may be reduced based on any federal estate taxes owed.

Note: The chart below shows no taxes owed on the first $40,000 of taxable income because of a system of tax credits from the state.

ILLINOIS ESTATE TAX RATES
Taxable Estate* Base Taxes Paid Marginal Rate Rate Threshold**
$1 – $40,000 $0 0% $0
$40,000 – $90,000 $0 0.8% $40,000
$90,000 – $140,000 $400 1.6% $90,000
$140,000 – $240,000 $1,200 2.4% $140,000
$240,000 – $440,000 $3,600 3.2% $240,000
$440,000 – $640,000 $10,000 4.0% $440,000
$640,000 – $840,000 $18,000 4.8% $640,000
$840,000 – $1.04 million $27,600 5.6% $840,000
$1.04 million – $1.54 million $38,800 6.4% $1.04 million
$1.54 million – $2.04 million $70,800 7.2% $1.54 million
$2.04 million – $2.54 million $106,800 8.0% $2.04 million
$2.54 million – $3.04 million $146,800 8.8% $2.54 million
$3.04 million – $3.54 million $190,800 9.6% $3.04 million
$3.54 million – $4.04 million $238,800 10.4% $3.54 million
$4.04 million – $5.04 million $290,800 11.2% $4.04 million
$5.04 million – $6.04 million $402,800 12.0% $5.04 million
$6.04 million – $7.04 million $522,800 12.8% $6.04 million
$7.04 million – $8.04 million $650,800 13.6% $7.04 million
$8.04 million – $9.04 million $786,800 14.4% $8.04 million
$9.04 million – $10.04 million $903,800 15.2% $9.04 million
$10.04 million and up $1,082,800 16.0% $10.04 million

*The taxable estate is the total above the exemption of $4 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.

 

What Is the Estate Tax?

The estate tax is a tax some states and the federal government levy on the estates of wealthy people after they have died but before the money is given to their heirs. It is sometimes called the “death tax.”

Don’t confuse the estate tax with the inheritance tax, which is a separate tax some states levy on recipients of an inheritance after it has been passed on.

Illinois Inheritance Tax

There is no inheritance tax in Illinois. The inheritance tax of other states could apply to you, though. In Kentucky, for instance, inheritance tax must be paid on any property inherited in the state, even if the heir doesn’t live there.

Illinois Gift Tax

There is no gift tax in Illinois. There is a federal gift tax that applies on gifts worth more than $14,000 for 2017 and $15,000 for 2018.

Illinois Estate Tax for Married Couples

The Illinois estate tax is not automatically portable between married couples. When one spouse dies, all wealth transfers to the surviving spouse without being subjected to the estate tax. When the second spouse dies, though, the estate can only use one spouse’s exemption.

Some couples use legal trusts to decrease the estate tax burden. If you think your estate will be subject to the estate tax, you should consider speaking to a financial advisor or an estate planning attorney to find how to use a trust.

Federal Estate Tax

There is also a federal estate tax you may be subject to, but it has a much higher exemption. The federal estate tax exemption is $11.18 million in 2018, after the 2017 tax law took effect. It is portable between spouses, meaning if the right legal steps are taken, a married couple can protect up to $22.36 million.

If an estate exceeds that amount, the top tax rate is 40%. A full chart of federal estate tax rates is below. You can use the same method described in the Illinois Estate Tax section to figure out your federal estate tax burden.

FEDERAL ESTATE TAX RATES
Taxable Estate* Base Taxes Paid Marginal Rate Rate Threshold**
$1 – $10,000 $0 18% $1
$10,000 – $20,000 $1,800 20% $10,000
$20,000 – $40,000 $3,800 22% $20,000
$40,000 – $60,000 $8,200 24% $40,000
$60,000 – $80,000 $13,000 26% $60,000
$80,000 – $100,000 $18,200 28% $80,000
$100,000 – $150,000 $23,800 30% $100,000
$150,000 – $250,000 $38,800 32% $150,000
$250,000 – $500,000 $70,800 34% $250,000
$500,000 – $750,000 $155,800 37% $500,000
$750,000 – $1 million $248,300 39% $750,000
Over $1 million $345,800 40% $1 million

*The taxable estate is the total above the exemption of $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.

Overall Illinois Tax Picture

What You Need to Know About the Illinois Estate Tax

Illinois is a very tax-friendly state for retirement. Almost all retirement income in Illinois is tax free, including pension plans, retirement plans and Social Security. For non-retirees, calculating Illinois income tax is fairly easy as the state has a flat tax of 4.95% that applies to everyone, regardless of income. You can figure out what your take home pay will be using our Illinois paycheck calculator.

Property taxes in Illinois are very burdensome, with an effective rate of 2.32%. That’s the second-highest in the country. The sales tax system is a bit complicated. There is a 1% statewide tax on groceries, drugs and medicine, plus local taxes of up to 1.25%. Vehicles have their own sales tax ranging from 6.25% to more than 8.5%. The base rate for general merchandise is 6.25%, and local taxes add between 1% and 4.5% to that number.

Estate Planning Tips

  • All of this can be complicated, so it’s understandable if you still have questions. Whether you owe an estate tax or not, it might make sense to think about getting a financial advisor to help you consider all of your financial issues. SmartAsset can help you find the right financial advisor for you. Here’s what to do: go to SmartAsset’s advisor matching service. You’ll answer a few questions about yourself and your finances. Our program will then match you with up to three advisors in your area who will contact you and see if they’re the right fit for your needs. All of the advisors on our platform have clean records with no disclosures and are registered financial advisors.
  • When planning your estate, you’ll want to know exactly what assets you have, including what’s in your retirement account. If you’re saving for retirement through an employer-sponsored plan, you can use our 401(k) calculator to see how much you can expect to have saved in retirement.
  • When writing your will, make sure you pick the right person to be your executor. This person will be responsible for making sure everything gets distributed the way you want, so pick someone who is up to the task.

Photo credit: ©iStock.com/FatCamera, SmartAsset, ©iStock.com/filo

Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing. When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
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