Illinois Payroll Tax Guide (2026)

The state floor is $15 an hour, but Chicago went to $17.05 and suburban Cook County to $15.40 on 1 July 2026, and the unemployment wage base rose to $14,250 while the maximum rate fell to 7.050%.^[6]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: IDOR, IDES, IRS

Quick Facts

Illinois payroll at a glance

Illinois has two state payroll taxes, both straightforward: a flat 4.95% income tax employers withhold and employer paid unemployment insurance, with no employee paid state disability or paid leave contribution.^[6]

State income tax withholding

4.95% flat ^[2]

UI taxable wage base

$14,250 per employee ^[6]

New employer UI rate

3.350% ^[6]

Experienced UI rate range

0.750%–7.050% ^[6]

Employee-paid state payroll tax

None ^[6]

Fund Building Rate

0.550% ^[3]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[13]

State minimum wage

$15.00 per hour ^[8]

Local minimum wage ordinances

2 jurisdictions ^[8]

Highest local minimum wage

Chicago, $17.05 ^[8]

UI registration trigger

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What changed for Illinois payroll in 2026

Six items moved for Illinois employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Chicago min wage 17.05 on 1 July Cook County 15.40 on 1 July UI wage base up to 14,250 Experience factor falls to 102% New employer rate down to 3.350% Secure Choice is My Illinois Savings

Adding the fund building rate to the rate on your determination: Illinois builds the 0.550% fund building rate into every 2026 contribution rate, including the 0.750% minimum, the 7.050% maximum and the 3.350% new employer rate. Adding it a second time overstates liability on every Form UI-3/40 you file. Use the single rate shown on your annual determination in MyTax Illinois and nothing more.^[3]

Estimate

2026 Illinois payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

Illinois · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate is on the annual contribution rate determination, shown under View your annual rates in MyTax Illinois.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $14,250–

Fund Building Rate, on first $14,250–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s Form IL-W-4 and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

Illinois runs three state payroll taxes. The table below is the whole state layer for 2026.^[6]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	0.750%–7.050%; 3.350% new	$14,250
Fund Building Rate	Employer	0.550%	$14,250
Income tax withholding	Employee	4.95% flat	No limit

The 2026 state experience factor is 102%, down from 114% for 2025, and the fund building rate holds at 0.550%. Every published rate already includes the fund building rate. New employers in NAICS sector 56, administrative support and waste management, pay 3.450% instead of 3.350%. These are all-in rates including the 0.550% fund building rate for 2026. USDOL publishes 0.20% to 6.50% because it excludes fund building; adding it to a published IDES rate double counts.^[6]

Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 4.95% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.^[2]

Who has to register

Register within 30 days of start up. Liability generally attaches on paying $1,500 in wages in a calendar quarter or employing someone in 20 different weeks in a year, and domestic employers register at $1,000 in a quarter. Register through MyTax Illinois or Form REG-UI-1.^[6] Income tax withholding is administered separately by Illinois Department of Revenue, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in Illinois generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[6]

How to register

Cross the wage threshold→
MyTax Illinois→
Receive account number→
annual contribution rate determination, shown under View your annual rates in MyTax Illinois→
File & deposit online

Deposit schedule

Set by the lookback period running 1 July to 30 June. Reporting $12,000 or less of withholding puts you on the monthly schedule, due the 15th of the following month. More than $12,000 puts you on semi-weekly, due Wednesday for Wednesday to Friday payrolls and Friday for Saturday to Tuesday payrolls.^[2]

Returns, reports & due dates

Form	What it is	Due
Form UI-3/40 Employer’s Contribution and Wage Report	Quarterly unemployment return	April 30, July 31, October 31, January 31
Form IL-501 for deposits and Form IL-941 as the withholding return, due the last day…	Income tax withholding returns	Set by the lookback period running 1 July to 30 June. Reporting $1
Annual reconciliation	Year-end withholding reconciliation	January 31
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[6]

Pricing

Payroll Pricing

Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.

Your Biweekly Payroll Statement

Line items the big providers quietly bill for

NO HIDDEN FEES
CROWNGLOBE

Setup fee

one-time onboarding

billed
extra

Every payroll run

each pay cycle

billed
extra

Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[6]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $14,250 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In Illinois that is $14,250 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating: The method Illinois Department of Employment Security uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Form IL-W-4: The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Illinois Department of Revenue.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.

Federal, State & Local

Illinois payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

Illinois has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[13]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	3.350%	$14,250
UI, experienced	0.750%–7.050%	$14,250
Fund Building Rate	0.550%	$14,250
Income tax, standard	4.95% flat	No limit
Income tax, supplemental	4.95%	No limit

Layer 3, county & city: no payroll tax, but a wage floor

No county or city in Illinois levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.^[8]

The state minimum wage is $15.00 an hour, effective 2025-01-01. The tipped cash wage is $9.00. 2 local jurisdictions set a higher floor. The highest is Chicago at $17.05. Chicago and suburban Cook County run their own ordinances and both stepped up on 1 July 2026: Chicago to $17.05 with a 12.96 dollar tipped rate, Cook County to $15.40 with a 9.25 dollar tipped rate. Cook County municipalities that opted out fall back to the 15 dollar state rate. Under state law, workers under 18 who work fewer than 650 hours in a year may be paid $13.^[8]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.^[12]

FAQ

Illinois payroll FAQs

Use the highest rate that covers the work location. The state floor is $15 an hour. Work performed in Chicago is $17.05 from 1 July 2026, and in suburban Cook County municipalities that have not opted out it is $15.40. Tipped rates are $9 statewide, $12.96 in Chicago and $9.25 in Cook County.

The taxable wage base is $14,250. A new employer at 3.350% pays up to $477.38 per worker, an employer at the 0.750% minimum pays up to $106.88, and one at the 7.050% maximum pays just over $1,004. All three rates already include the 0.550% fund building rate.

Only if you had 25 or more employees during the prior calendar year. Those employers file wage reports electronically through MyTax Illinois for the first two months of each quarter and still pay contributions on the quarterly deadline. The quarterly Form UI-3/40 must also be filed electronically at that size.

Illinois looks back at the twelve months from 1 July to 30 June. If you reported $12,000 or less of withholding, you are a monthly payer and Form IL-501 is due by the 15th of the following month. Above $12,000 you pay semi-weekly. Form IL-941 is due the last day of the month after each quarter either way.

No. Illinois has no employee paid unemployment contribution, no state disability insurance and no paid family leave payroll deduction. The only mandatory state deduction from wages is the flat 4.95% income tax, computed using the exemption allowance claimed on Form IL-W-4.

Employers with at least five Illinois employees in every quarter of the prior year, that have operated for two or more years and have no qualified plan, must enroll in My Illinois Savings, formerly Illinois Secure Choice. The program costs the employer nothing, employers are not plan fiduciaries, and the default employee contribution is 5% into a Roth IRA.

$14,250 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$15.00 an hour. 2 local jurisdictions set a higher rate, so check the rate for the location where the employee actually works. The tipped cash wage is $9.00.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 5 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

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