Illinois Estate Tax: What It Is and How We Got Here
Read about the Illinois estate tax, its history, key rules for residents and property owners, and what it means in practice.
The Illinois estate tax affects more people than many expect (although there’s no inheritance tax). If your taxable estate tops $4 million, the Illinois estate tax may apply—whether you live in the state or simply own Illinois real estate. Rates are graduated, topping out at 16%.
If the gross estate plus adjusted taxable gifts exceeds $4,000,000, the representative files Illinois Form 700. That often means attaching a completed federal Form 706 (even when not required federally) so Illinois has the schedules and valuations it needs. Filings go to the Attorney General’s Estate Tax Section per the latest instructions.
Because the Illinois estate tax threshold is lower than the federal level, Illinois planning focuses on that $4 million line. Many households keep a close inventory, consider how gifts affect adjusted taxable gifts. It’s also important to understand how the state QTIP election and the lack of portability change outcomes for the Illinois estate tax compared with federal rules.
How We Got Here
Illinois once tied its tax to a federal credit. When Congress phased that credit out in the 2000s, Illinois adjusted on its own. Lawmakers raised the exemption to $1.5 million in 2004, $2 million in 2006, $3.5 million in 2012, and $4 million in 2013—where it remains today.
Administration also shifted. Today, the Illinois Attorney General administers filings. Estates that exceed $4,000,000 (after including certain lifetime gifts) must file Illinois Form 700. Payments go to the State Treasurer.
Key Rules for Residents and Property Owners
Threshold and Rates
The Illinois estate tax applies once the estate exceeds $4 million, with a graduated schedule that reaches 16%. The exclusion is a threshold—not a dollar-for-dollar credit—so calculation uses Illinois’ own worksheet.
Who’s Covered
Illinois residents are subject to the Illinois estate tax on all taxable assets. Nonresidents can also owe Illinois estate tax on Illinois-sited property (like a condo or farmland).
Spousal Transfers
Transfers to a surviving spouse generally qualify for the marital deduction, deferring tax. Illinois also allows a separate, state-only QTIP election that can fine-tune how much is deferred at the first spouse’s passing.
Portability
Unlike federal rules, Illinois does not let a surviving spouse port any unused $4 million exclusion. Each spouse’s Illinois exclusion stands alone, which is a big planning distinction for the Illinois estate tax.
Federal vs. State
For 2025, the federal filing threshold is $13.99 million—far above Illinois’ $4 million level. That means some estates file and pay state tax even when no federal estate tax is due.
What the Illinois Estate Tax Means in Practice
The Chicago Homeowner
A lifelong Chicago resident passes with $4.2 million: a home, retirement accounts, and savings. The total exceeds $4 million, which requires an Illinois return. There’s no federal estate tax here because the estate is below $13.99 million.
The Nonresident With Illinois Property
A Missouri resident owns an Illinois lake house worth $1.5 million plus other out-of-state assets that bring the total estate above $4 million. Even as a nonresident, the estate may owe tax on the Illinois property share. The Illinois tax can apply based on Illinois-sited assets.
The Married Couple and the No Portability Wrinkle
Spouse A leaves everything to Spouse B. Thanks to the marital deduction (and an optional Illinois-only QTIP election), no tax is due at the first passing. But Illinois doesn’t allow portability. Therefore, Spouse B still has only a $4 million Illinois exclusion later. That difference from federal rules often shapes how families structure gifts and trusts.
(Read More: Learn about revocable trusts in Illinois versus Nevada.)