Request a Demo

Illinois Wage and Payroll Tax Facts

February 02, 2024

Having to comply with unique state taxes and wage laws can make processing payroll doubly daunting. Here’s everything you need to know about these rates and laws for the state of Illinois.

Select a state or federal tax guide
Skip to end of table of contents

In addition to the state minimum wage rate being higher than the federally mandated rate, Cook County and the city of Chicago also use a different rate for employees in those areas. These two areas also have their own Paid Sick Leave programs guaranteeing time off for local employees.  
 
When it comes to processing payroll, Illinois-based organizations must handle the following taxes in addition to those required by the federal government:

The below information was last updated July 1, 2024. It is not intended as legal or tax advice.

Illinois Minimum Wage Rates

Wage Type

Illinois Rates

Federal Rates

Minimum Wage

$14.00

$7.25

Tipped Minimum Wage

$8.40

$2.13

Actual Tip Credit

$5.60

 $5.12

Local Minimum Wage Rates

In addition to the state-wide minimum wage rates above, some cities and counties have unique minimum wage rates as well:

Wage Type

Chicago Rates*

Cook County Rates

Minimum Wage

$16.20

$14.05

Tipped Minimum Wage

$11.02

$8.40

Actual Tip Credit

$5.18

$5.65

*For employers with four or more employees.

Illinois State Income Tax (SIT) Rates

Illinois has a flat income tax rate of 4.95%, meaning all residents pay the same amount regardless of their income levels. Illinois also requires nonresidents who work in Illinois to pay state income tax unless they live in a reciprocating state (see below).

Additional Illinois SIT Details

Valid Filing Statuses

 N/A

Exemptions
  • Nonresidents from a reciprocating state
  • Nonresident military spouses
  • Nonresident interstate carrier employees
  • Residents performing services in another state where compensation is subject to other state withholdings
  • Employees whose compensation is exempt from federal withholding requirements (e.g., household employees and ministers or members of a religious order)

Form W-4

 Form IL-W-4

Reconciliation Frequency

Annually

Illinois State Unemployment Insurance (SUI) Rates

SUI provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined by state law) and meet the state’s eligibility requirements.

Illinois SUI Tax Details

Taxable Wage Base

$13,590

Employee Subject to Tax

No

Rates for Experienced Employers*

0.85% – 8.65%

Rates for New Employers*

3.95%

Effective Period

Calendar Year

Voluntary Contributions Allowed

No

*This includes a 0.55% Fund-Building surtax.

Illinois State Disability Insurance (SDI) Rates

SDI benefits are normally funded by employees through mandatory payroll deductions from each paycheck. Illinois, however, doesn't require employers to collect an SDI tax.

Miscellaneous Illinois Tax Information

Reciprocal Agreement(s)

Reciprocal agreements are when workers who live and work in different states are only required to pay taxes to the state where they live. Illinois currently has reciprocal agreements with the following states:

  • Iowa
  • Kentucky
  • Michigan
  • Wisconsin

Residents of those states who work in Illinois aren't subject to Illinois SIT but must file a Form IL-1040.

Paid Sick Leave (PSL) Taxes

The state of Illinois doesn’t require employers to collect PSL taxes, but it does have a program providing such leave to eligible employees:

Illinois PSL Details

Covered Employees

 All full-time and part-time employees

Covered Employers

 All; including state and local government employers

Accrual Method(s)

1 hour per 40 hours worked

Annual Accrual Maximum

40 hours

Carryover Allowed

Yes, but employers aren’t required to offer more than 40 hours of leave in a single year

Frontloading Allowed

Yes

Probationary Period

90 days

FAQs

Paid Leave for All Workers FAQ

Note: This program doesn't preempt the local paid leave programs for Chicago or Cook County.

Paid Family and Medical Leave (PFML) Taxes

The state of Illinois doesn’t require employers to collect PFML taxes, nor does the state have a program providing such leave to employees.

Illinois Employer Registration

The agencies below can help with your state-based employer registration, including best practices, account numbers, and unemployment information. Contact the Department of Revenue for withholding tax topics and the Department of Employment Security for unemployment tax topics.

Registration Details

Department of Revenue

Department of Employment Security

Phone

(217)-785-3707

(800) 247-4984

Online Registration

 MyTaxIllinois Login Page

Registration Instructions

Employers can register online or by phone. If registering online, your account number will be issued during registration. The same account number will be issued for Withholding and Unemployment.

Employer Self-Service Login

MyTaxIllinois Login Page

Additional Illinois Payroll Tax Resources

 

This information is provided as a courtesy and may be updated at any time. It is not intended as legal or tax guidance. If you have questions or concerns, we encourage you to seek the advice of a qualified CPA, tax attorney, or advisor.

011002000110a-taxservices-fullwidth

Get Taxes Done Right, Without the Stress

We know there's a lot that goes into preparing and filing payroll tax forms. Save time and get support from our expert team. As a Registered Reporting Agent with the IRS, we can help prepare and file all the necessary forms you need to remain compliant - even in the face of changing legislation. Learn more here.

Payroll Tax Services