Illinois Capital Gains Tax: What You'll Actually Owe
If you are selling appreciated property in Illinois, the state tax is only one of four layers, and usually not the one that does the most damage.
Illinois capital gains tax calculator
Enter your sale and see the 2026 tax in Illinois: federal capital gains tax, the 3.8% net investment income tax and Illinois state tax, then the same sale spread over the years the buyer pays you. It runs on the same engine as our capital gains tax calculator, in your browser. Rental property, your home, land, a business, stock or collectibles.
You keep $1,162,800 after selling costs and tax. The tax is 28.3% of your gain.
Your gain
- Sale price less selling costs$1,425,000
- Less your basis$500,000
- Your taxable gain$925,000
- Depreciation, taxed at up to 25%$150,000
- Long-term gain at 0%, 15% or 20%$775,000
The tax, line by line
- Federal income tax (incl. $7,830 AMT)$183,163
- Net investment income tax (3.8%)$33,250
- Illinois tax$45,788
- Total tax$262,200
- You keep$1,162,800
Get the REAL numbers
Talk to capital gains expert Hans Goldstein, EA.
These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.
Why now: the year you close and how the buyer pays you are set before closing, and they decide how much of this Illinois tax you keep.
Book my 15-minute callThis is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free.
Worked example (computed October 13, 2026)
A married couple in Illinois sells a rental for $1,500,000 with $75,000 of selling costs. Their adjusted basis is $500,000 after $150,000 of depreciation, and other income is $200,000. The gain is $925,000. All in one year the tax is $262,200: $183,163 federal, $33,250 net investment income tax and $45,788 Illinois tax, or 28.3% of the gain. Spread over 10 years on a note, the tax on the gain is $212,574, so they keep $49,627 more (interest on the note is taxed separately).
What is the tax bill on your Illinois sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Go deeper: capital gains tax in Illinois when you sell a business, real estate or a farm on Big Sale Tax.
How Illinois treats capital gains
Illinois taxes capital gains as ordinary income at a flat 4.95%. There is no preferential rate and no long-term discount.
The three layers on a Illinois sale
Most sellers budget for one tax and get hit with four:
- Federal long-term capital gains at 0%, 15% or 20% depending on total taxable income for the year.
- Net investment income tax of 3.8% once modified AGI passes $200,000 single or $250,000 married filing jointly. Those thresholds are not indexed for inflation, so more sellers cross them every year.
- Depreciation recapture, if the asset was a rental or business property. The real-property portion is taxed at up to 25% as unrecaptured Section 1250 gain, and equipment is recaptured as ordinary income. See depreciation recapture.
- Illinois state tax at up to 4.95%, applied on top of everything above.
The result on a large sale is around 28.75%.
Why the year matters more than the rate
Every one of those layers is triggered by income landing in a single tax year. The federal rate steps from 0% to 15% to 20% based on taxable income. The 3.8% surtax switches on at a fixed threshold. For sellers 65 and older, the new $6,000 senior deduction begins phasing out at $75,000 of modified AGI ($150,000 joint) and is fully gone by roughly $175,000 ($250,000 joint), so a single large sale wipes it out completely.
Spreading the same gain across several years keeps each year's income lower, and each layer is calculated on that lower number. That is the entire mechanism behind an installment sale under IRC §453, and it is why two sellers with identical gains can pay very different totals.
Recapture is the exception: under §453(i) it is recognized in the year of sale regardless of how payments are structured.
What this actually costs: Illinois numbers
Take a $500,000 long-term gain, on top of $200,000 of other income, married filing jointly.
That is roughly 29% of the gain before any recapture. The Illinois portion alone is about $24,750, money that has nothing to do with the federal rules everyone reads about.
If the asset was ever a rental or business property, add depreciation recapture: up to 25% on the real-property portion and ordinary rates on equipment.
The four layers, in the order they hit you
1. Federal capital gains. 0%, 15% or 20%, decided by your total taxable income for the year, including the gain itself. That is why one large sale lands people in the 20% bracket who normally sit far below it.
2. The 3.8% net investment income tax. Switches on above $200,000 modified AGI single, $250,000 married filing jointly. Those thresholds have never been indexed for inflation, so each year quietly captures more sellers.
3. Depreciation recapture. Only if you depreciated the asset. The real-property portion is unrecaptured Section 1250 gain at up to 25%; equipment is Section 1245 recapture at ordinary rates. The §1245 piece cannot be spread: §453(i) puts it in the year of sale. Unrecaptured §1250 gain on a building is spread with the payments.
4. Illinois tax. at up to 4.95%, applied on top of everything above.
Who Illinois can tax, and on what
- Real property is taxed where it sits. If the property is physically in Illinois, Illinois taxes the gain whether or not you live there. Moving does not help you on in-state real estate.
- Everything else generally follows residency on the date of sale: business interests, stock, collectibles.
If you are a non-resident selling real property in Illinois, expect withholding at closing and a non-resident return the following spring. Withholding is an estimate, not the final tax.
Does spreading the sale help in Illinois?
Yes. Illinois taxes the gain as ordinary income, so the amount landing in a single year drives your state bracket as well as your federal one. Spreading the gain pulls both down at once, which is why the effect compounds in high-rate states.
An installment sale under IRC §453 spreads the gain across the years you actually receive payments, so every threshold above is tested annually instead of once.
The trade-offs deserve stating plainly: you need a buyer willing to pay over time, you carry collection risk, recapture still lands in year one, and large installment balances can trigger an interest charge under §453A. It fits some sales and not others, which is exactly what a conversation before closing is for.
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Find out what your tax bill actually looks like before you sell, including the parts your CPA may not raise until the return is already being prepared.
Most people find out what they owe after the sale closes, when nothing can be changed. A short conversation now tells you the number, which layers apply to your situation, and which options are still open while the sale is still in front of you.
- What you will actually owe: federal, the 3.8% surtax, recapture and your state
- Which of those layers you can still do something about
- Whether spreading the sale changes the number in your case
Hans Goldstein · 213-414-2808 · Hans Goldstein: Tax & Exit Planning · This is an educational conversation, not tax advice. Bring your CPA in before you file.
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Selling a house in Illinois: what you'll actually owe
An Illinois sale can involve two kinds of tax: transfer taxes at closing and income tax on the gain.
Transfer taxes at closing
Illinois charges a state real estate transfer tax of $0.50 for each $500 of value (35 ILCS 200/31-10). Counties may add up to $0.25 per $500 (55 ILCS 5/5-1031). In Cook County, the County Clerk lists the seller as the party liable for both the state and county stamps.
Inside the City of Chicago, there is also the city Real Property Transfer Tax of $5.25 per $500. That total is a $3.75 City portion, generally paid by the buyer, and a $1.50 CTA portion, generally paid by the seller. The "Bring Chicago Home" proposal for higher tiered rates on pricier sales was rejected by voters in March 2024, and the City's Department of Finance still lists the flat $5.25 rate. Other home rule municipalities may have their own stamps, so the local rule depends on where the property sits.
How Illinois taxes the gain
Illinois taxes individuals at a flat 4.95% of net income (rate in effect since July 1, 2017). There is no separate, lower rate for long term capital gains. Illinois starts from your federal adjusted gross income, so gain you exclude federally is generally not added back.
The federal home sale exclusion (IRC Section 121) lets you exclude up to $250,000 of gain, or up to $500,000 on a joint return, if you owned and lived in the home at least 24 months of the last 5 years and did not use the exclusion in the prior 2 years.
If you no longer live in Illinois
Under 35 ILCS 5/303(b)(1), capital gains from real property are allocated to Illinois when the property is located in Illinois. A nonresident who sells Illinois real estate reports that gain on Schedule NR with Form IL-1040 when Illinois income exceeds the exemption allowance. Because Illinois begins with federal AGI, gain recognized in a later year under an installment sale would generally flow through in that later year, still allocated to Illinois.
Withholding at closing
The Illinois withholding statute is built around employer compensation, and no state withholding requirement on an individual's home sale proceeds was identified. Federal FIRPTA withholding of 15% can apply when the seller is a foreign person, with an exemption at $300,000 or less for a buyer who will live in the home.
Common mistakes Illinois sellers make
- Forgetting the seller's stamps. State, county, and in Chicago the CTA portion can all land on the seller.
- Assuming a move ends Illinois tax. Gain on Illinois real property is still Illinois income for a nonresident.
- Expecting a capital gains discount. Illinois uses the same 4.95% rate.
- Assuming every town matches Chicago. Municipal transfer taxes vary.
Rules change and every sale is different; verify your situation with a CPA or the Illinois Department of Revenue at tax.illinois.gov.
Worked example: a Illinois home sale in 2026
Assumptions: married filing jointly, a home bought for $400,000 including improvements and sold for $1,200,000, lived in for at least 2 of the last 5 years. The $800,000 gain minus the $500,000 exclusion leaves $300,000 of taxable long-term gain, on top of $150,000 of other taxable income.
This is arithmetic on stated assumptions, not a projection of anyone's actual bill. For how the exclusion works when the gain runs past it, see capital gains on a home sale over the exclusion.
Frequently asked
Q: What is the Illinois capital gains tax rate? A: Up to 4.95%. Illinois taxes capital gains as ordinary income, so the rate depends on your total income for the year.
Q: Does Illinois have a lower rate for long-term capital gains? A: No. Illinois applies the same rates to long-term and short-term gains. The preferential 0/15/20% treatment exists only at the federal level.
Q: How do I calculate capital gains tax in Illinois? A: Start with your sale price minus your adjusted cost basis, which is what you paid plus improvements minus any depreciation you took. That gain is then subject to federal capital gains rates, potentially the 3.8% net investment income tax, depreciation recapture if it was a rental, and Illinois tax. The calculator on this site layers all four.
Q: Can I avoid Illinois capital gains tax by moving before I sell? A: Residency changes are scrutinised closely and the facts matter a great deal, including where you lived at closing and whether the asset is real property physically located in the state. Real estate is generally taxed by the state where it sits regardless of where you live. Talk to a CPA before relying on this.
Selling something specific in Illinois?
- Selling real estate: tax deferral guide
- Selling a business: tax deferral guide
- Selling a mobile home park: tax deferral guide
- Selling a self-storage facility: tax deferral guide
- Selling a dental practice: tax deferral guide
- Selling a veterinary practice: tax deferral guide
- Selling a SaaS business: tax deferral guide
- Selling an insurance book of business: tax deferral guide
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-414-2808