Illinois Capital Gains Tax (2026)
Illinois capital gains tax rate: Taxed as ordinary income at 4.95%
Illinois taxes capital gains as ordinary income at the flat 4.95% rate. Chicago residents also pay a 1.25% city income tax, increasing the combined state + city rate to 6.2% for capital gains.
Federal Capital Gains Rates Still Apply to Illinois Residents
All Illinois residents also owe federal capital gains tax. Federal long-term capital gains rates are 0% (income up to ~$47,025 single), 15% (income up to ~$518,900 single), or 20% (above). High earners may also owe the 3.8% Net Investment Income Tax (NIIT).
Short-Term vs. Long-Term Capital Gains in Illinois
Assets held less than one year are taxed as ordinary income at federal rates (10%–37%). Assets held over one year qualify for the preferential 0%/15%/20% federal rates. Illinois taxes capital gains as ordinary income at the flat 4.95% rate. Chicago residents also pay a 1.25% city income tax, increasing the combined state + city rate to 6.2% for capital gains.
Planning Considerations for Illinois Investors
- Tax-loss harvesting can offset gains at both state and federal levels
- Timing asset sales to control income year and bracket placement
- Illinois taxes capital gains at Taxed as ordinary income at 4.95% — factor this into net-of-tax return calculations
- Qualified Opportunity Zone investments can defer federal and potentially state gains
Frequently Asked Questions
What is the capital gains tax rate in Illinois?
Illinois taxes capital gains as ordinary income at the flat 4.95% rate. Chicago residents also pay a 1.25% city income tax, increasing the combined state + city rate to 6.2% for capital gains. Federal rates (0%, 15%, 20% for long-term gains) also apply regardless of state.
Does Illinois have a different rate for long-term vs. short-term capital gains?
Illinois does not distinguish between short- and long-term capital gains — both are taxed as ordinary income at up to 4.95% flat. Only federal law provides preferential long-term capital gains rates.
How do I reduce capital gains tax in Illinois?
Strategies include: holding assets over one year for federal long-term rates, tax-loss harvesting to offset gains, contributing to retirement accounts (401k, IRA), investing in Qualified Opportunity Zones, and timing sales across tax years. In Illinois, capital gains are taxed at up to Taxed as ordinary income at 4.95%, so these strategies reduce both federal and state tax.
Is this capital gains tax calculator free for Illinois?
Yes. Enter your gain amount, holding period, and annual income. The calculator applies both federal rates (0%/15%/20% long-term) and Illinois's Taxed as ordinary income at 4.95% state rate to estimate your total tax owed.