Updated October 4, 2026. Quick answer: No, in practice. Illinois lets a retiree subtract federally taxed income from “a government retirement and government disability plan, including military plans,” on Form IL-1040 Line 5, and prints no dollar cap or age limit.
How Illinois treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Line 5 subtraction of federally taxed government retirement income, including military plans |
| Cap or age | None printed |
| Reported as | Publication 120 ties the subtraction to military retirement reported as wages on U.S. 1040 Line 1z |
| Rate on other income | 4.95 percent for 2025 |
A $30,000 example
A retiree with $30,000 of federally taxed military retired pay subtracts it on Line 5, so none of that pay is left to tax.
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What changes in 2026
No 2026 change is printed in the documents read.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Publication 3, Armed Forces’ Tax Guide.
Related: whether Illinois taxes pensions, how Illinois taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- Publication 120, Retirement Income (R-12/25): https://tax.illinois.gov/content/dam/soi/en/web/tax/research/publications/pubs/documents/pub-120.pdf
- 2025 Form IL-1040 Instructions: https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-instr.pdf
Sources: the primary documents linked above, read on October 4, 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.