Updated October 30, 2026. Quick answer: No, in general. Publication 120 says “You may subtract the amount of any federally taxed portion” of income from “a government retirement and government disability plan, including military plans”, and the IL-1040 instructions set the Illinois rate on what remains.
What Illinois does with a FERS or CSRS annuity
| Question | What the Illinois documents say |
|---|---|
| What the source says | Illinois lets a retiree subtract federally taxed income from a government retirement plan, and the state documents cited here do not name CSRS or FERS separately, so a federal civilian annuity falls under the general government retirement plan language. |
| Amount or limit | The federally taxed portion of qualifying retirement income is subtracted on Form IL-1040, Line 5, with no dollar cap printed in the state documents cited here. |
| State rate printed | The 2025 instructions print a flat Illinois income tax rate of 4.95 percent. |
| Change for 2026 | No 2026 change is printed in the state documents cited here. |
In the Illinois documents’ own words
- “federally taxed portion (not the gross amount) included in your Form IL-1040” (Publication 120, Retirement Income)
- “The Illinois income tax rate is 4.95 percent” (2025 Form IL-1040 Instructions)
How this differs from other pensions in Illinois
Government retirement plans, qualified employer plans, IRAs, railroad retirement and Social Security are all listed together as subtractable on Line 5, so the government plan rule is the same as the rule for private qualified plans. See also Does Illinois tax pensions? and military retirement pay.
FERS, CSRS and your TSP
Publication 120 lists IRA distributions and qualified employee benefit plans including 401(k) plans as subtractable, but the state documents cited here do not address TSP withdrawals by name. For the Thrift Savings Plan itself, see state tax on TSP withdrawals and the TSP calculator.
Where this rule sits on the Illinois return
The subtraction is claimed on Form IL-1040, Line 5, which covers government plans, qualified employer plans, IRAs, railroad retirement and Social Security together.
Checks before you rely on this answer
- Use the federally taxed portion of the annuity from your federal return, since that is what Line 5 lets you subtract.
- Add any other qualifying retirement income to Line 5 so the subtraction is complete.
- Remember that income from other sources, such as wages, is taxed at the flat Illinois rate in the instructions.
What the Illinois documents leave open
Neither document names CSRS, FERS or federal civilian annuities, so the federal case is read from the general government retirement plan wording. Publication 120 (R-12/25) lists the government plan item as income reported as wages on Line 1z of the federal return and does not say where an annuity paid on Form 1099-R falls, TSP withdrawals are not addressed by name, the statute text was not read, and no 2026 booklet exists yet.
Common mistakes
- Treating the exemption as limited to Illinois plans. The wording is a government retirement plan, and the federal case is read from it.
- Subtracting more than was taxed federally. The subtraction is the federally taxed portion, not the gross payment.
Related: Does Illinois tax pensions?, Illinois military retirement pay, Illinois retirement deduction line by line, and FERS, TSP and Social Security sequencing.
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Answer againSources
- 2025 Form IL-1040 Instructions: https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-instr.pdf
- Publication 120, Retirement Income: https://tax.illinois.gov/content/dam/soi/en/web/tax/research/publications/pubs/documents/pub-120.pdf
Read from the state documents linked above on October 30, 2026. General information, not tax advice.