Illinois Estate Tax 2026: $4M Exclusion and Rates

The Illinois estate tax starts above $4 million, and that threshold counts lifetime taxable gifts as well as what you own at death. Illinois also does not let a surviving spouse carry over a late spouse's unused exclusion.1 That makes planning matter for couples near the line. This guide tells you whether your estate owes and which form the executor files.

If you own a home and have retirement savings in Illinois, add them up before you assume the tax is only for the very wealthy.

Illinois Estate Tax at a Glance

Here is the full picture in one table. Illinois runs a graduated estate tax, administered by the Illinois Attorney General and filed on Form 700.1 An estate tax is a liability of the estate itself, and Illinois is not on the list of states that impose an inheritance tax on heirs.2

How the Illinois Estate Tax Works

An estate tax applies to the taxable value of a deceased person's estate, and the estate itself is liable for it, not the heirs.2 In Illinois the tax is administered by the Illinois Attorney General, and the return is Form 700.1

The exclusion is $4,000,000, and it is applied after adjusted taxable gifts are added in.1 That second half is the part families miss: lifetime taxable gifts count toward the threshold, so an estate worth less than $4 million on the date of death is not automatically clear. The Attorney General's own worked example is a decedent leaving $3,000,100 who had made $1,000,000 in adjusted taxable gifts, and that estate owes $28 of Illinois estate tax. Once the threshold is crossed, the estate files Form 700, the Illinois estate tax return, whether or not the IRS requires a federal return.1

The rate is graduated, climbing in brackets to a top rate of 16 percent as the taxable estate grows.1 The $4 million figure is a taxable threshold, not a credit: once an estate exceeds it, the tax is figured on the estate's value under that graduated schedule.1

How much you actually owe depends on the size of the estate, so estimate it before you assume the worst. Use the Form 700 instructions the Illinois Attorney General publishes, or have an Illinois estate attorney run the number for your estate. Two structural features make the Illinois tax tougher than the headline exclusion suggests, and they get their own section below.

The test is the estate's gross value, plus adjusted taxable gifts, not the cash on hand.1 When you add it up, list the home and any other real estate, bank and brokerage accounts, retirement accounts like IRAs and 401(k)s, life insurance the person owned, business interests, and vehicles. Then ask an Illinois estate attorney which of those count and at what value before you decide you are under the line.

A Far Lower Line, and No Portability

Two things about the Illinois estate tax catch families off guard.

First, the Illinois exclusion is $4,000,000,1 far below the federal basic exclusion of $15,000,000 for deaths in 2026.3 An estate can owe nothing federally and still owe Illinois, so the federal number is the wrong one to check against.

Second, Illinois does not allow portability.1 The carry-over of a deceased spouse's unused federal exemption does not apply to the Illinois computation, so a surviving spouse cannot simply add a late spouse's unused exclusion to their own. Federal law is different: a surviving spouse can use a late spouse's unused federal exclusion if the executor elects it on a timely filed Form 706.3 In Illinois, without planning, the first spouse's unused exclusion is lost, and it is the kind of gap that surfaces in probate when it is too late to fix. There is one other spousal route worth asking an attorney about: for deaths on or after January 1, 2009, an estate may make a QTIP election for Illinois purposes on a timely filed Illinois return, separate and independent of any federal QTIP election, and that election reduces the adjusted taxable estate.1 For couples whose combined assets are near or above $4 million, that is the reason to plan while both spouses are living. This is general information, not legal or tax advice, and an Illinois estate attorney can build the structure that fits your situation.

Consider a married couple with $7 million in combined assets. If the first spouse leaves everything to the survivor, the survivor's estate is later taxed with only one $4 million exclusion instead of the two the couple could have used.1 Ask an Illinois estate attorney whether a credit-shelter (bypass) trust or an Illinois QTIP election fits your situation before the first death, not after.

The general statewide exclusion remains $4 million.1 Always confirm the current figure with the Illinois Attorney General before relying on it.

Estate Tax Is Not Inheritance Tax

These two terms get used as if they mean the same thing. They do not, and the difference decides who is liable.

An estate tax applies to the taxable value of the deceased person's estate, and the estate itself is liable for it. An inheritance tax applies to the taxable value of what is left to each heir, and the heirs are liable for it, although the estate pays it.2 For deaths on or after January 1, 2025, five states impose an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Illinois is not one of them; it is one of the 12 states, plus the District of Columbia, with an estate tax.2 That list comes from a Connecticut legislative survey current to the end of 2024, so confirm with the Illinois Attorney General or an estate attorney when you settle an estate.

For heirs, that means the Illinois estate tax is the estate's liability: it can reduce what is left to divide.2

Not the Federal Tax, Not Medicaid Recovery

Two other things get confused with the Illinois estate tax. Both are different, and the distinction matters.

The federal estate tax is separate, and its exemption is far higher. For deaths in 2026 the federal basic exclusion amount is $15 million per decedent, more than three times Illinois' $4 million exclusion, and it is increased for inflation for deaths in calendar years after 2026.3,1 A state estate tax can fall on an estate that owes nothing to the IRS.3 The federal tax is filed on Form 706, and Illinois Form 700 must be filed whether or not a federal return is required.3,1 Clearing the federal bar does not tell you whether you owe Illinois.

Medicaid estate recovery is not a tax at all. It is the process by which a state seeks repayment of Medicaid it paid, and federal law requires states to seek it in set cases, including from the estate of someone who got Medicaid at 55 or older, for nursing facility and home and community-based services.4 If a parent received Medicaid-paid nursing home care, the relevant concern is recovery, not the estate tax. We cover it fully in Medicaid estate recovery; the similar name does not make them one issue.

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Next Steps

Add up the home, the accounts, and the life insurance, then add any lifetime taxable gifts, and see whether the total clears $4 million.1 If you are married and near the line, the lack of portability makes early planning worth it.

For the exact tax and the forms, the Illinois Attorney General's estate-tax page has Form 700 and its instructions. To set up trust planning, an Illinois estate attorney can do it and confirm the current exclusion; the Illinois State Bar Association is one place to start looking for one.

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The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.