Does Illinois Have Its Own Estate Tax?
Yes. Illinois imposes a separate state estate tax with a $4 million exclusion amount for 2026, compared with the federal estate tax exemption of $15 million. As a result, an estate that is below the federal estate tax threshold may still be subject to Illinois estate tax. (illinoisattorneygeneral.gov)
And unlike the federal estate tax system, Illinois does not allow portability of a deceased spouse’s unused estate tax exclusion. That means married couples need to consider Illinois-specific planning rather than assuming that any unused $4 million exclusion automatically transfers to the surviving spouse. (illinoisattorneygeneral.gov)
How Illinois Differs From Federal Estate Tax
The federal and Illinois estate tax systems operate under different rules:
● Federal exemption (2026): $15 million per person, with portability available between spouses
● Illinois exclusion amount: $4 million per decedent
● Federal top estate tax rate: 40%
● Illinois estate tax: A separate state-level tax with its own calculation
The difference between the federal and Illinois thresholds means an estate can be below the federal $15 million threshold and still have Illinois estate tax exposure. (irs.gov)
Illinois lawmakers have introduced proposals to increase the state's estate tax exclusion. For example, HB2601, introduced in 2025, proposed increasing the exclusion to $8 million beginning in 2026, but the bill did not become law. Additional proposals have since been introduced, including legislation proposing a higher exclusion beginning in 2027. For now, the Illinois exclusion remains $4 million. (ilga.gov)
What Counts Toward the $4 Million?
The Illinois estate tax isn't limited to cash or investment accounts. Depending on the circumstances, the estate can include:
● Home and other real estate
● Retirement accounts, including 401(k)s and IRAs
● Life insurance proceeds, when the policy is included in the taxable estate
● Business interests
● Investment and brokerage accounts
● Other property and interests included in the taxable estate
For many Illinois families, these categories can add up more quickly than expected.
Why No Portability Matters for Married Couples
Under federal law, a surviving spouse can generally use a deceased spouse's unused federal estate tax exemption if the proper portability election is made.
Illinois is different. Federal portability does not carry over to the Illinois estate tax calculation. (illinoisattorneygeneral.gov)
That doesn't mean a married couple is automatically limited to $4 million of combined planning opportunities. Marital deductions, trusts, and other estate-planning strategies can affect when and how Illinois estate tax is ultimately imposed.
The key point is that married couples should not assume that an unused Illinois exclusion automatically transfers to the surviving spouse.
What This Means for Your Planning
This isn't about alarm — it's about making sure your estate plan accounts for both federal and Illinois rules, not just the system you've heard the most about.
Depending on your situation, that might mean revisiting:
● How assets are titled
● How trusts are structured
● How and when assets pass between spouses
● How life insurance is owned
● Whether your current estate plan takes Illinois estate tax into account
These are conversations worth having with your financial advisor and estate attorney together, because the right approach depends on your assets, family circumstances, and overall estate plan.
FAQ
Does Illinois also have an inheritance tax?
No. Illinois imposes an estate tax, not a separate inheritance tax. Estate tax is generally imposed on the estate rather than directly on the beneficiary based on what that beneficiary receives.
Is there a gift tax in Illinois?
Illinois does not impose a separate state gift tax. However, lifetime gifts can still have implications for federal estate and gift tax calculations.
Is the Illinois exemption adjusted for inflation?
No. The Illinois estate tax exclusion has remained at $4 million since 2013, rather than automatically increasing with inflation. (illinoisattorneygeneral.gov)
Is the Illinois exemption portable between spouses?
No. Illinois does not recognize federal portability for purposes of its estate tax. Each spouse's Illinois exclusion must be addressed through the estate-planning structure rather than assuming unused exclusion will automatically transfer to the surviving spouse. (illinoisattorneygeneral.gov)
This material is provided for informational and educational purposes only and is not intended to provide legal, tax, or individualized investment advice. Estate planning and tax laws are subject to change. Please consult your qualified tax or legal professional regarding your individual circumstances.
This content is for informational purposes only and does not constitute personalized investment, tax, or legal advice. Please consult your advisor and estate planning attorney regarding your specific situation.