Updated October 5, 2026. Quick answer: Yes. Illinois taxes a trust’s net income at a flat rate, set by statute as an amount equal to “4.95% of the taxpayer’s net income for the taxable year”. Trusts also pay a separate replacement tax, shown on the Illinois trust return.
How Illinois treats trust income
| Item | What the documents say |
|---|---|
| Treatment | The Illinois income tax is a tax on net income that is “hereby imposed on every individual, corporation, trust and estate”. The department describes it as a tax on income earned or received in Illinois or as a resident of Illinois. |
| Who counts as a resident trust | A trust is a resident if it was created by the will of a decedent domiciled in Illinois at death, or if it is “an irrevocable trust, the grantor of which was domiciled in this State”. The statute treats a trust as irrevocable only to the extent the grantor is not treated as its owner under the federal grantor-trust rules. |
| Rate on trust income | Net income is taxed at a flat 4.95% for years beginning on or after July 1, 2017, the same rate as for individuals. Trusts also owe a replacement tax on the same return: “Multiply Line 33 by 1.5% (.015)”. The replacement tax step is for trusts only, and estates skip it. |
| Distribution deduction | The Illinois tax base starts from the trust’s federal taxable income, and a trust must file even when it deducts amounts paid out: “regardless of any deduction for distributions to beneficiaries”. Income passed to beneficiaries is reported by them on their own returns. |
| Nonresident trusts | A nonresident trust with Illinois income files Schedule NR “to determine the income that is taxed by Illinois”. Grantor trusts are not required to file the trust return. |
| Exemption | Illinois adds back the federal trust exemption it deducted, which is $300 for a trust required to distribute all income currently and “any other trust, $100”. The Illinois standard exemption is figured separately on the return. |
| Return to file | The trustee files Form IL-1041, the Fiduciary Income and Replacement Tax Return, which is “Due on or before the 15th day of the 4th month”. The month count runs from the close of the tax year. |
A $10,000 example
A trust with $10,000 of taxable income that it keeps, rather than distributes, is taxed at 4.95%, computed as $10,000 x 4.95% = $495, before any deduction or exemption the state allows. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Illinois taxes retirement income, whether Illinois taxes pensions, what a living trust costs in Illinois, trust income tax by state, and federal trust tax brackets.
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Answer againSources
- 35 ILCS 5/1501 Definitions (Illinois Income Tax Act): https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=003500050K1501
- 35 ILCS 5/201 Tax imposed (Illinois Income Tax Act): https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=003500050K201
- Fiduciary (Trust and Estate) tax information page: https://tax.illinois.gov/research/taxinformation/income/fiduciary.html
- 2025 Form IL-1041 Fiduciary Income and Replacement Tax Return: https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/business/fiduciary/il-1041.pdf
- 35 ILCS 5/203 Base income (Illinois Income Tax Act): https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=003500050K203
- 2025 Schedule NR (Form IL-1041) Nonresident Computation of Fiduciary Income: https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/business/fiduciary/il-1041-schedule-nr.pdf
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.