Illinois does not tax Social Security Disability Insurance (SSDI) income

Illinois is one of the states that does not tax SSDI benefits on your state income tax return. If SSDI is your only income, you will not owe Illinois state income tax on those payments. This applies whether you file as a single filer or as part of a joint return.

However, the federal government may still tax your SSDI depending on your total income from all sources. State tax treatment and federal tax treatment are separate calculations, so not owing Illinois tax does not mean you are free from federal tax on the same income.

Key Takeaways

  • Illinois does not tax SSDI benefits, so you will not owe state income tax on those payments alone.
  • If you have other income besides SSDI—such as wages, pensions, or interest—you may still owe Illinois state tax on that other income.
  • Federal tax rules for SSDI are different from Illinois rules, and you may owe federal tax even if you owe nothing to Illinois.
  • You should still file a federal return if your total income crosses the threshold, even if Illinois owes you nothing.

What counts as income in Illinois besides SSDI

While Illinois does not tax SSDI itself, it does tax other forms of income. If you receive wages from work, retirement pension payments, interest from savings accounts, or rental income, you will owe Illinois state tax on those amounts if they exceed the state's filing threshold.

Some people receive both SSDI and other income at the same time. For example, you might receive SSDI and also work part-time, or receive a pension from a previous job. In those cases, the SSDI portion is not taxed by Illinois, but the wages or pension are.

Supplemental Security Income (SSI) is a different program from SSDI, and Illinois also does not tax SSI benefits. However, if you receive both SSDI and SSI, only the SSDI portion is may provide tax-free under Illinois law.

Federal tax on SSDI is separate from Illinois tax

The federal government has its own rules for taxing SSDI, and those rules are stricter than Illinois's. Even though you owe Illinois nothing on SSDI, the IRS may tax up to 85 percent of your SSDI benefits if your combined income is high enough.

Combined income for federal purposes includes your SSDI, plus half of your SSDI, plus any other income you received that year. This means a person with SSDI and a part-time job may owe federal tax even though Illinois taxes only the wages.

You will receive a Social Security Benefit Statement (Form SSA-1099) each January showing how much SSDI you received the previous year. You use this form to report SSDI on your federal return, and the IRS uses it to calculate whether any of your benefits are taxable.

When you need to file a return even with only SSDI

If SSDI is your only income and it is below the filing threshold, you are not required to file a federal return. However, you may want to file anyway if you paid taxes through withholding or if you are owed a refund from other credits.

Some people have taxes withheld from their SSDI payments voluntarily. If you requested withholding and your SSDI is your only income, filing a return allows you to recover that money as a refund.

Illinois does not require a separate state return if you do not owe state tax, but you should check whether you are owed a state refund before deciding not to file.

How to report SSDI on your Illinois return

On the Illinois Form IL-1040 (the state income tax return), SSDI does not appear as a line item because it is not taxable income. You will still report your total income from other sources—wages, pensions, interest, and so on—but you do not include SSDI in that total.

If you use tax software, the program will ask you about SSDI income separately and will automatically exclude it from your Illinois taxable income. If you prepare your return by hand, straightforward omit SSDI from the income section.

On your federal return (Form 1040), you must report SSDI even though it may not be taxable. The IRS uses this information to calculate your combined income and determine whether any portion of your benefits is subject to federal tax.

Other Illinois tax credits you might use with SSDI

If you receive SSDI and have little or no other income, you may still be able to claim certain Illinois tax credits. The Earned Income Tax Credit (EITC) is not available to SSDI recipients alone, but other credits may explore depending on your situation.

If you have dependent children and receive SSDI, you may be able to claim the Child and Dependent Care Credit or other family-related credits on your federal return. These credits can result in a refund even if you owe no tax.

The best way to know whether you may have access to for any credits is to file a return or to use the IRS's interactive tax assistant tool, which walks through your situation and identifies credits you may use.

Frequently Asked Questions

Do I have to file an Illinois return if I only get SSDI?

No. Illinois does not require you to file a state return if SSDI is your only income and you are below the filing threshold. However, you may want to file if you had taxes withheld or if you are owed a refund from a credit.

Will I owe federal tax on my SSDI even though Illinois does not tax it?

You may. Federal tax rules are different from Illinois rules. If your combined income (SSDI plus other income) is high enough, the IRS may tax up to 85 percent of your SSDI benefits. Illinois taxing nothing does not affect the federal calculation.

What if I receive both SSDI and a pension?

Illinois will not tax the SSDI portion, but it will tax the pension income if it exceeds the filing threshold. You report the pension on your Illinois return and omit the SSDI. The federal government taxes both according to its own rules.

Can I claim tax credits on my SSDI?

SSDI itself does not make you ineligible for credits. If you have dependent children or other may have access to circumstances, you may claim credits on your federal return. File a return or use the IRS tax assistant to see which credits explore to you.

Where do I report SSDI on the Illinois Form IL-1040?

You do not report SSDI as income on the Illinois return because it is not taxable in Illinois. Report only your other income—wages, pensions, interest. On your federal Form 1040, you must report SSDI separately so the IRS can calculate whether any is subject to federal tax.