Is Indiana's income tax really lower than Illinois's after county taxes?

Yes, in most counties. Indiana's state rate is 3.05% in 2026 (3.0% in 2027) plus county add-ons averaging 1.6% — combined ~4.65%. Illinois is 4.95% flat with no local income tax. Net Indiana advantage on a $100K salary runs $200-$1,900/yr depending on which Indiana county you live in. Hamilton County (Carmel) sits at the low end with 1.1% county tax; Pulaski sits near 3.4%.

How much higher is Illinois property tax than Indiana?

Illinois averages 2.07% effective property tax versus Indiana's 0.84% — a 1.23 percentage point gap. On a $400K home, that's $8,300/yr in Illinois versus $3,400/yr in Indiana, a $4,900/yr difference. Cook County and the collar counties (DuPage, Lake, Will) run higher than the Illinois average; Indiana's 1% homestead cap (constitutional, 2010) keeps Indiana bills predictable.

Does Illinois have an estate tax?

Yes. Illinois imposes estate tax on estates over $4 million at rates up to 16%. The $4M threshold has not been indexed for inflation since 2013. Combined with the federal exemption of $13.99M (2026), estates between $4M and $14M owe Illinois but not federal — a band that captures many family-business and farm estates. Indiana repealed inheritance tax in 2013 and has no estate tax.

Why is Chicago's sales tax 10.25%?

Chicago stacks four rates: Illinois state (6.25%), Cook County (1.75%), Regional Transportation Authority (1.0%), and City of Chicago (1.25%). Restaurants add another 0.5% Metropolitan Pier and Exposition Authority tax and 0.25% city restaurant tax for a 11.25%-11.75% effective rate. It's the highest combined sales tax of any major US city.

Should I move from Chicago to Indianapolis for tax savings?

If you own a home worth more than $300K, the math usually works. Property-tax savings alone (typically $4,000-$8,000/yr) plus income-tax savings ($1,500-$2,500/yr depending on income and Indiana county) net to $5,500-$10,500/yr in pre-federal-tax dollars. Renters see only the income-tax difference, which is real but smaller. The lifestyle trade is genuine — Chicago's cultural depth doesn't have an Indianapolis equivalent.

State Comparison

Illinois vs Indiana: Tax & Cost of Living Comparison (2026)

Illinois carries one of the heaviest combined state-and-local tax loads in the country. Indiana sits in the bottom third. The income-tax gap (4.95% flat in Illinois vs 3.05% flat in Indiana for 2026, scheduled to drop to 3.0% in 2027) understates the divergence — Illinois property tax averages 2.07% effective, second-highest nationally, and Cook County stacks sales tax to 10.25% in Chicago. Here's the full picture across $50K-$200K.

Last reviewed: May 7, 2026 · Reviewed by ProSalaryTax tax research team

TL;DR — 30-second version

1.On a $100K salary, Indiana take-home runs roughly $1,900/yr higher than Illinois — Indiana's 3.05% flat rate against Illinois's 4.95% flat rate, with no bracket games on either side.
2.Property tax is the larger gap. Illinois averages 2.07% effective (~$8,300/yr on a $400K home) versus Indiana's 0.84% (~$3,400/yr). Over a 10-year hold that's $50,000 of compounding cost.
3.Sales tax: Chicago's combined 10.25% (state 6.25% + Cook County + RTA + city) is the highest big-city rate in the nation. Indianapolis runs 7.0%. Outside Chicago the gap narrows but doesn't close.
4.Illinois has an estate tax with a $4M exemption — well below the federal $13.99M. Estates in the $4-14M range owe Illinois but not federal. Indiana has no estate or inheritance tax.
5.Net migration tells the story: Illinois lost roughly 56,000 residents in 2024, Indiana gained 22,000. Most of the outflow heads south and east — Indiana, Florida, Texas, Tennessee.

Take-Home Pay: Illinois vs Indiana

Gross Salary	Illinois	Indiana	Difference
$50,000	$40,677	$41,355	+$678 Indiana
$75,000	$58,677	$59,855	+$1,178 Indiana
$100,000	$75,027	$76,705	+$1,678 Indiana
$150,000	$107,163	$109,841	+$2,678 Indiana
$200,000	$139,824	$143,502	+$3,678 Indiana

Assumes single filing status, standard deduction, no 401(k) or HSA contributions. 2026 tax year.

Tax-by-Tax Breakdown

Income Tax

Illinois: 4.95% flat

Indiana: 3.05% flat (2026; 3.0% in 2027)

Winner: Indiana by ~1.9 pts

Both states tax wages at a single flat rate — no progressive brackets. Indiana's House Enrolled Act 1001 (2023) sets a phased reduction: 3.05% in 2026, 3.00% in 2027, with further cuts conditioned on revenue triggers. Indiana counties layer an additional 0.5%-3.38% local income tax (avg ~1.6%) which closes some of the gap; Illinois has no local income tax.

Property Tax

Illinois: 2.07% effective (2nd highest in US)

Indiana: 0.84% effective

Winner: Indiana by 1.23 pts

On a $400K home, Illinois runs $8,300/yr versus Indiana's $3,400/yr — a $4,900/yr gap that compounds. Indiana caps property taxes at 1% of gross assessed value for homesteads (the state's 'circuit breaker' enacted 2008). Illinois has no equivalent cap; some Cook County and collar-county bills exceed 3%.

Sales Tax

Illinois: 6.25% state + up to 4.0% local (avg ~8.85%; Chicago 10.25%)

Indiana: 7% state, no local sales tax (flat 7.0%)

Winner: Indiana by ~1.9 pts statewide

Chicago's 10.25% combined rate ties for the highest among major US cities. Illinois groceries and prescriptions are taxed at a reduced 1% rate (statewide grocery tax was eliminated effective Jan 1, 2026). Indiana exempts groceries entirely. On $50K of taxable household spending, Illinois sales tax runs ~$4,400/yr versus Indiana's $3,500/yr.

Estate Tax

Illinois: 16% top rate, $4M exemption

Indiana: None

Winner: Indiana

Illinois imposes estate tax on estates over $4M (no inflation indexing — same threshold since 2013). With the federal exemption at $13.99M in 2026, the $4M-$14M estate band owes Illinois state estate tax but no federal. Indiana repealed its inheritance tax in 2013 and has no estate tax.

Chicago Premium vs Indianapolis Value

Median home prices through Q1 2026 sit at roughly $260K in Indiana (Indianapolis $245K, Fort Wayne $200K, Bloomington $290K) versus $295K in Illinois statewide — but the Chicago metro median is $345K, and North Shore suburbs (Wilmette, Evanston, Winnetka) routinely list at $700K-$1.5M. Outside Chicago, downstate Illinois (Springfield, Peoria, Rockford) tracks Indianapolis closely on price per square foot.

The property-tax bill is the killer for Illinois homeowners. A $400K home in Naperville or Oak Park easily hits $9,000-$12,000/yr in property tax against $2,800-$3,800/yr for the equivalent house in Carmel or Fishers. Over a 10-year hold the differential exceeds $60,000 — enough to flip the entire 'Chicago commands a premium' calculation when buyers actually run the math.

Sales tax stacks the same direction. Chicago's 10.25% combined rate applies to most retail; Cook County alone adds 1.75% on top of state and city. Restaurants in downtown Chicago carry an additional 0.5% Metropolitan Pier tax and 0.25% restaurant tax, pushing dining receipts above 11.25%. Indianapolis runs a flat 7.0% with no local stack.

Auto insurance and energy lean Indiana. Illinois averages $1,900/yr for auto insurance versus Indiana's $1,500/yr (CommonGround data). Electricity is closer — Illinois 13¢/kWh, Indiana 14¢/kWh — but Illinois's recent capacity-auction price spikes (PJM 2025-26) are pushing Northern Illinois bills upward roughly 20% annually for residential customers.

Income tax on $100K (single)

Illinois ~$4,950/yr · Indiana ~$3,050/yr (state) plus ~$1,200/yr (county avg). Indiana's county add-on closes the gap to roughly $700/yr in low-county-rate areas like Hamilton (Carmel) and widens to $0 difference in high-county-rate Lake (Gary).

Property tax on $400K home

Illinois ~$8,300/yr · Indiana ~$3,400/yr. Indiana's 1% homestead cap is constitutional (Article 10 §1, ratified 2010). Illinois has no cap and Cook County reassesses on a 3-year cycle.

Sales tax (combined avg)

Illinois 8.85% statewide, 10.25% in Chicago · Indiana 7.0% flat. Chicago restaurants add 1.5% on top, pushing dining receipts past 11.25%. Indiana has no local sales tax stack at all.

Estate tax exposure

Illinois 16% top rate above $4M exemption · Indiana none. Estates in the $4M-$14M band owe Illinois but not federal. Family-business succession in Illinois often requires GRATs or out-of-state trusts to avoid the state-only band.

Auto insurance avg (2026)

Illinois ~$1,900/yr · Indiana ~$1,500/yr. Chicago dense-traffic claims drive Illinois higher; Indiana's lower urban density and centralized fault-based system keep premiums down.

Median home price (Q1 2026)

Illinois $295K (Chicago metro $345K) · Indiana $260K (Indianapolis $245K). North Shore Chicago suburbs run $700K-$1.5M; Carmel and Fishers cap around $400K-$550K for equivalent floor plans.

Who Wins for Whom

Family, $90K household, Chicago commuter considering Indiana

Best fit: Indiana

On $90K family income, Illinois costs $3,800/yr in state income tax plus roughly $8,300/yr in property tax on a $400K Naperville home — total $12,100. Indiana (Crown Point or Munster, with the same Chicago commute via South Shore Line) costs $2,500 state + $1,200 county + $3,400 property = $7,100. Net $5,000/yr Indiana advantage — funding a 401(k) match plus a Roth IRA every year. The commute trade-off is real (45 vs 25 min from a Chicago suburb) but the tax math compounds harder than the time math.

Single renter, $65K downtown Chicago

Best fit: Roughly even — Chicago wins on lifestyle, Indiana wins on savings rate

On $65K renting, Illinois income tax runs ~$2,800; Indiana state $1,800 plus county add-on ~$1,000 = $2,800 combined — basically tied. Chicago's 10.25% sales tax versus Indianapolis's 7% is the real friction: on $25K of taxable spending, Chicago costs $815/yr more. For a 25-year-old chasing the city scene, Chicago's cultural depth wins easily. For a 35-year-old saving aggressively for a house, Indiana's lower sales-tax-and-housing stack acts as a forced-savings mechanism — roughly $4,000/yr more disposable income.

Tech worker, $150K base, hybrid

Best fit: Indiana

Indianapolis's downtown tech corridor (Salesforce, Eli Lilly tech, Infosys, OneAmerica) plus Bloomington's IU spinout density gives Indiana a real if smaller employer base. Combined with Indiana's 3.05% flat (rolling to 3.0%) plus low property tax, take-home runs $4,000-$6,000/yr higher than equivalent Chicago role. Chicago wins on raw salary ceiling; Indianapolis wins on what lands in the bank.

Retiree (no mortgage, $1M+ portfolio)

Best fit: Indiana

Both states tax retirement income, but Indiana's flat 3.05% and lack of estate tax are decisive for anyone over $4M in assets. Illinois's $4M estate-tax threshold catches family farms and small-business estates that the federal $13.99M exemption would otherwise spare. Illinois does fully exempt Social Security and qualified retirement-account distributions from state income tax — meaningful for moderate-income retirees but not enough to offset the property-tax burden for homeowners.

Family with kids, $130K household

Best fit: Indiana (Indianapolis suburbs)

Carmel, Fishers, and Zionsville public schools rank in the top 5% nationally on most metrics; New Trier (Illinois) and Naperville 203 are stronger but cost $7,000-$10,000/yr more in property tax for the equivalent home. Indianapolis's Children's Museum and family-friendly downtown give Chicago a genuine cultural fight without the tax bill.

Homeowner, 20-year hold

Best fit: Indiana

The 1% homestead cap alone is worth $80,000-$120,000 of cumulative property tax savings over two decades versus Illinois. Long holds reward Indiana's circuit breaker; Illinois's reassessment cycle systematically captures appreciation.

Small-business owner with succession planning

Best fit: Indiana

Illinois's $4M estate exemption is a planning headache for any owner whose business + real estate + retirement assets exceed it. Indiana's repeal of inheritance tax (effective 2013) and lack of estate tax simplifies family transitions. Illinois owners often need irrevocable trusts or out-of-state holding entities to avoid the state-level band.

Should You Actually Move?

Illinois has lost population every year since 2014. Net domestic migration was negative 56,000 in 2024 — the third-largest outflow behind California and New York. Indiana ran positive 22,000 over the same period, with the largest single-state inbound flow coming from Illinois itself. The Chicago-to-Indianapolis or Chicago-to-Crown-Point move is well-trodden and the moving companies (Allied, Mayflower, North American) all rank Illinois in their top-5 outbound states annually.

The math works clearly for homeowners. A family selling a $500K Naperville home pays roughly $11,000/yr in property tax; the same family in Carmel pays $4,500. Layer the income-tax delta ($1,500-$2,000/yr) and the gross gap is $7,500-$8,000/yr. Over a 10-year hold, that's a fully-funded 529 or a paid-off second car — not abstract savings.

The trade-offs are real, though. Indiana has no Lake Michigan, no pro sports density (Pacers and Colts are it; no NFL Bears, no Cubs, no Sox), and Indianapolis lacks Chicago's restaurant and theater scene. For empty-nesters and remote workers the math overwhelms the lifestyle gap; for young professionals the calculus tilts back toward Chicago. Indianapolis is where Chicago's post-kids exodus lands.

Run your numbers through the right calculator

Salaried, freelance, bonus, overtime, or tips — pick the tool that matches your event.

Salary Calculator

Annual gross to take-home: federal + state + FICA + 401(k)/HSA modeling for all 50 states.

Calculate take-home

Overtime Calculator

Apply the 2025 OBBBA 'No Tax on Overtime' deduction (up to $12,500) and see real savings.

Calculate OT take-home

1099 Tax Calculator

1099, sole prop, or LLC: self-employment tax (15.3%) plus quarterly estimates.

Calculate SE tax

Bonus Calculator

Year-end, sign-on, retention, or commission. Compare flat 22% vs aggregate withholding.

Calculate bonus

Illinois vs Indiana: The Honest Verdict

If you own a home, Indiana wins decisively. Property tax alone closes the case — $5,000/yr difference on a $400K home compounds into real money over any reasonable hold. Add the 1.9-point income-tax gap, lower sales tax, and no estate tax, and the gross annual savings for a $130K-household homeowner cluster around $7,000-$10,000. That's a 401(k) match plus a Roth IRA every year, indefinitely.

Single highest-leverage move: don't buy in Cook County. The combined property-tax-plus-RTA-sales-tax-plus-Chicago-city stack adds up to a structural surcharge that downstate Illinois doesn't carry. If your job requires Chicago presence, rent in the city and own in Indiana (Munster, Crown Point, Lake County IN) for the cross-border arbitrage — a well-worn move. If the job is remote, Indianapolis's cost-of-living advantage compounds annually with no hurricane risk, no earthquake risk, and a manageable winter.

Frequently Asked Questions

Find answers to common questions about your taxes and our calculator.

Sources & Methodology

Calculate Your Exact Take-Home Pay

Enter your salary, filing status, 401(k), and HSA to see your personalized result in any state.

Open Full Calculator