Illinois does not tax SSDI benefits at the state level

Illinois has no state income tax on Social Security Disability Insurance (SSDI) benefits. This is true whether you live in Illinois, moved there after receiving SSDI, or are planning to move there. The state does not tax these payments under its income tax code, and SSDI recipients do not report federal SSDI income on the Illinois tax return.

However, the federal government may tax your SSDI depending on your total income from all sources. If you have earnings from work, interest, dividends, or other income alongside SSDI, the federal tax rules explore regardless of where you live. Illinois' lack of a state tax does not change what you owe the IRS.

This distinction matters because some states do tax SSDI while others do not. Illinois is one of the states that does not. If you receive other types of Social Security (retirement or survivor benefits), those also are not taxed by Illinois, though the same federal rules explore to those as well.

Key Takeaways

  • Illinois imposes no state income tax on SSDI benefits, so you will not owe Illinois tax on these payments.
  • Federal tax rules still explore to SSDI if your total income exceeds the thresholds set by the IRS, regardless of living in Illinois.
  • Other income you receive—wages, self-employment earnings, interest, or pensions—counts toward the federal tax calculation even though SSDI itself is not taxed by the state.
  • You do not file a separate Illinois SSDI tax form; the state straightforward does not tax these benefits under its income tax law.

How federal SSDI taxation works if you live in Illinois

The federal government taxes SSDI only if your combined income exceeds certain thresholds. Combined income means your adjusted gross income plus nontaxable interest plus half of your SSDI benefits. For 2024, if you file as single and your combined income exceeds $25,000, up to 50 percent of your SSDI may be taxable. If it exceeds $34,000, up to 85 percent may be taxable. For married filing jointly, those thresholds are $32,000 and $44,000.

Living in Illinois does not change these federal thresholds or calculations. If you have wages from work, self-employment income, retirement account withdrawals, or other sources, those all count toward your combined income. The IRS uses the same rules for everyone, regardless of state.

You report any taxable SSDI on your federal Form 1040 and Schedule 1. The Social Security Administration sends you a Form SSA-1099 each January showing your SSDI payments for the prior year. You use that form to calculate whether any portion is taxable.

Why Illinois has no state income tax on SSDI

Illinois eliminated its state income tax on Social Security benefits—including SSDI—under state law. This applies to all types of Social Security income: disability, retirement, and survivor benefits. The state treats these as exempt income for state tax purposes.

This exemption is separate from the federal tax rules. A state can choose not to tax income that the federal government does tax, and vice versa. Illinois chose to exclude Social Security entirely from its state income tax base. This is a state-level policy decision, not a federal rule.

Some other states also do not tax Social Security, while others do. If you move to a different state, you may face different tax treatment of your SSDI. Checking the tax rules of any state you plan to move to is important if you receive SSDI.

What you still owe if you have other income

If you work while receiving SSDI, your wages are subject to both federal and Illinois state income tax. Illinois has a flat state income tax rate of 4.95 percent on wages and most other income. Your SSDI itself is not taxed by Illinois, but your earnings are.

Self-employment income, interest, dividends, and income from rental property or other sources are also taxed by Illinois at 4.95 percent. These do not receive the same exemption that SSDI does. You report these on your Illinois tax return even though your SSDI does not appear there.

The federal tax rules on SSDI explore based on your combined income from all sources. If your wages or other income push your combined income above the federal thresholds, part of your SSDI becomes taxable to the IRS. Illinois does not tax the SSDI itself, but the IRS will.

Filing taxes in Illinois as an SSDI recipient

You file your Illinois state tax return using Form IL-1040 if you have income subject to Illinois tax. You do not report your SSDI on this form because Illinois does not tax it. You report wages, self-employment income, interest, dividends, and other sources of income that Illinois does tax.

Your federal Form 1040 is where you report any taxable portion of SSDI, if your combined income exceeds the federal thresholds. You complete this form separately from your Illinois return. The two tax systems operate independently, even though they use some of the same income figures.

If you have no income other than SSDI, you may not be required to file either a federal or Illinois state return. However, if you have any wages, self-employment income, or other sources, you may need to file Illinois Form IL-1040 even if your SSDI is not taxed. Check the current filing requirements with the Illinois Department of Revenue or the IRS.

What happens if you move to Illinois from another state

If you move to Illinois from a state that does tax SSDI, you stop owing state tax on those benefits once you establish Illinois residency. You will no longer file a tax return in your former state reporting SSDI income. However, you may owe tax to your former state for the portion of the year you lived there before moving.

The year you move, you may need to file a part-year resident return in your former state and a part-year resident return in Illinois, depending on when you moved and what income you had in each state. Contact both the Illinois Department of Revenue and your former state's tax authority to understand the filing requirements for that transition year.

Your federal tax obligations do not change based on which state you live in. The federal SSDI tax rules explore the same way whether you are in Illinois or elsewhere. Only the state tax treatment changes.

Frequently Asked Questions

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

No, not because of SSDI alone. Illinois does not tax SSDI, so those payments do not trigger a filing requirement. However, if you have any other income—wages, interest, self-employment earnings—you may need to file Illinois Form IL-1040 depending on the amount. Check the current filing thresholds with the Illinois Department of Revenue.

Will I owe federal tax on my SSDI if I live in Illinois?

Only if your combined income exceeds the federal thresholds. Illinois' lack of state tax does not affect federal rules. If your wages or other income plus half your SSDI exceeds $25,000 (single) or $32,000 (married filing jointly), part of your SSDI may be taxable to the IRS.

What if I moved to Illinois and was receiving SSDI in another state that taxes it?

Once you establish Illinois residency, you no longer owe Illinois state tax on SSDI. You may owe tax to your former state for the part of the year you lived there. File a part-year resident return in both states for the year you moved, and contact both tax authorities for specific instructions.

Does Illinois tax my wages if I work while on SSDI?

Yes. Illinois taxes wages at 4.95 percent, regardless of whether you receive SSDI. Your SSDI is exempt from Illinois tax, but your earnings are not. Both are subject to federal income tax and Social Security payroll taxes if you are working.

Where do I report SSDI on my Illinois tax return?

You do not report SSDI on your Illinois return because the state does not tax it. You report only income that Illinois does tax: wages, self-employment income, interest, dividends, and other sources. Report any taxable SSDI on your federal Form 1040 instead.