Income: Flat 4.95%
One rate on net income for every filer, in effect since July 1, 2017.
Financial planning in Illinois
A flat-fee financial advisor serving Illinois.
A flat 4.95% that does not touch retirement income at all — and a $4 million estate threshold.
Flat 4.95%Illinois income tax, tax year 2025.
$4 million exclusionIllinois estate tax.
$150–$1,650/qtrFlat quarterly memberships, no AUM fee, no annual commitment.
Minnetonka-basedA Minnesota firm serving Illinois households virtually; no Illinois office is claimed.
Direct answer
What Is Different About Financial Planning in Illinois?
Illinois taxes income at a flat 4.95%, and it exempts retirement income entirely: Social Security, pensions and 401(k) and IRA distributions are all subtractable. That makes Illinois one of the cheapest places in the country to convert to Roth. The other side is the estate tax, which applies above $4 million with the exclusion working as a threshold rather than a credit, so an estate a little over the line is taxed on far more than the excess. For a Chicago household the plan is built around those two facts.
Illinois tax treatment
How Illinois taxes a planning household
Figures are for tax year 2025, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.
Source
Retirement income: Fully exempt — Social Security, pensions, 401(k) and IRA distributions
The federally taxed portion of Social Security, qualified employer plan distributions including 401(k)s, and IRA distributions — including amounts rolled over to a Roth IRA — can all be subtracted from Illinois income.
Estates: $4 million exclusion, which is a threshold rather than a credit
An Illinois estate tax return is required when the gross estate plus adjusted taxable gifts exceeds $4,000,000. The exclusion is a taxable threshold and not a credit against tax, so an estate over the line owes tax on much more than the amount over it. Illinois follows federal rules for QTIP elections between spouses.
Worth doing here
Planning opportunities specific to Illinois
Things that are worth doing in Illinois that would not be worth doing, or would work differently, somewhere else.
Roth conversions are free of state tax
Because IRA distributions — including amounts converted to a Roth — are subtractable, converting tax-deferred savings while an Illinois resident costs only federal tax. For someone who may retire to a state that taxes retirement income, converting here first can be worth a great deal.
The Bright Start and Bright Directions subtraction
Contributions to Illinois's 529 plans can be subtracted up to $10,000 a year, or $20,000 on a joint return.
Estate planning at $4 million
With the threshold far below the federal exclusion and no indexing, couples with more than $4 million between them generally need trust planning and a state QTIP election to use both spouses' exclusions.
Federal and state, together
How Illinois Tax Interacts With Your Federal Return
Illinois income tax at 4.95% together with Cook County property tax often exceeds the federal deduction cap, and above $500,000 of modified adjusted gross income the cap shrinks toward $10,000. In retirement, with no state tax on retirement income, the cap stops mattering for most households.
The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).
Cities
Where we work with Illinois households
Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.
Chicago, IL
Chicago's professional households are paid through a wide mix: restricted stock and deferred compensation at the publicly traded companies headquartered in the city and its northern suburbs, partnership income at the trading firms, law practices and consultancies downtown, and hospital-system pensions and 403(b)s across the medical centres.
Watch and learn
Financial Planning, Explained Clearly
Start with three videos selected for this page, then use the controls to explore every published Flames FP video guide.
Videos 1–3 of 14
What Nobody Tells You About Earning $400K a Year
See why a $400K income can still leave too little investable margin and how taxes, lifestyle growth, and deliberate investing change the result.
The RSU Strategy Most $300K Tech Earners Miss
Understand taxation at vesting, check the withholding gap, and turn each RSU vest into a deliberate diversification and household-planning decision.
The 3-Account System for a $250K Income
Use cash reserves, tax-advantaged accounts, and a taxable brokerage account to turn a strong income into a repeatable wealth-building system.
The 6 Levels of Wealth for $200K+ Households
Use six stages to separate a high income from the wealth it actually creates.
The Most Underrated Retirement Account
How a taxable brokerage account can support retirement flexibility alongside tax-advantaged accounts.
How to Decrease Your Tax Bill
Review practical tax-planning decisions that can connect income, investments, retirement, and withholding.
Should You Invest or Spend Your HSA?
A practical framework for deciding how an HSA fits healthcare costs, taxes, and retirement planning.
Four Common Backdoor Roth IRA Mistakes
Understand contribution, conversion, pro-rata, and reporting mistakes before they create tax problems.
Direct Indexing vs ETFs in a Taxable Account
Compare diversification, tax management, cost, and complexity before changing an investment strategy.
My New Favorite Account to Gift Money to Kids and Grandkids
Compare the new child investment account with 529 plans, custodial accounts, Roth IRAs for earned income, and the family's actual goals.
Estate Planning Documents You May Need
A plain-English review of wills, powers of attorney, healthcare directives, beneficiaries, and trusts.
Flat Fee vs 1% Financial Advisor
See how a percentage fee changes in dollars as a portfolio grows and what to compare beyond the headline rate.
How Much Life Insurance Do You Need?
Think through income replacement, debt, children, childcare, education, and family risk.
Five Money Mistakes High Earners Make
Common coordination gaps involving taxes, cash flow, investments, insurance, and estate planning.
Common questions
Illinois Financial Planning Questions
Does Illinois tax retirement income?
No. Social Security, pensions, 401(k) distributions and IRA distributions — including Roth conversions — are all subtractable from Illinois income.
Is there an Illinois estate tax?
Yes, above $4,000,000. The exclusion is a threshold rather than a credit, so an estate just over it is taxed on much more than the excess.
Does Illinois give a deduction for 529 contributions?
Yes, up to $10,000 a year ($20,000 on a joint return) for contributions to Bright Start, Bright Directions or College Illinois.
Does Flames Financial Planning have an office in Illinois?
No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves Illinois households through a virtual planning relationship. This page describes the service area and does not claim a Illinois office.
Is Illinois tax planning part of the relationship?
Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.
Next step
See what a flat-fee relationship would cost a Illinois household.
A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.