Updated October 7, 2026. Quick answer: No, not as a nonresident. The Schedule NR instructions tell nonresidents that their pensions “and annuities are not taxed by Illinois.” Illinois residents can subtract most retirement income as well.
How Illinois treats a pension earned elsewhere
| Item | What the state documents say |
|---|---|
| Nonresidents | A nonresident of Illinois does not enter pension, annuity, or IRA income on Schedule NR, and the state says federally taxed Social Security and retirement income are not taxed for a nonresident. A nonresident files Form IL-1040 with Schedule NR only for income from Illinois sources. |
| Residents with a pension earned elsewhere | An Illinois resident starts from federal income, so a pension from another state is included in base income. Certain retirement income, such as pension, Social Security, railroad retirement, and governmental deferred compensation, may be subtracted on Line 5. The source says: “pension, Social Security, railroad retirement, governmental deferred compensation) may be subtracted”. The state points residents to Publication 120, Retirement Income, for what qualifies. |
| Part-year residents (year of a move) | A part-year resident files Schedule NR and reports pensions and annuities received as an Illinois resident, regardless of the source. Federally taxed retirement income received as a resident is subtracted on Line 42. The source says: “received as an Illinois resident, regardless of the source.” Pension income received while a nonresident is not taxed by Illinois. |
| Rate | Illinois prints a flat income tax rate of 4.95 percent for 2025. The source says: “The Illinois income tax rate is 4.95 percent (.0495).” |
| Return to file | Residents file Form IL-1040. Part-year residents and nonresidents file Form IL-1040 with Schedule NR, checking the nonresident or part-year resident box. The source says: “you must file Form IL-1040 and Schedule NR if”. |
A $40,000 move-year example
A retiree receives $40,000 of pension in the year of a move: $20,000 before the move date, as an Illinois resident, and $20,000 after leaving.
The first $20,000 can be taxed by Illinois; the rest is outside its reach under the federal rule below. At the 4.95% rate printed for 2025, the tax on it is computed as $20,000 x 0.0495 = $990, before any exclusion or credit. Federal tax still applies.
The federal rule that protects a nonresident
4 U.S.C. 114(a) bars a state income tax on retirement income of an individual “who is not a resident or domiciliary of such State”. Retirement income means certain plan payments made as a “series of substantially equal periodic payments”, so not every payment is covered.
Related: how Illinois taxes retirement income, whether Illinois taxes pensions, Illinois to Arizona retirement taxes, Illinois to Florida retirement taxes, out-of-state pension tax by state, and deferred compensation lump sums after a move.
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Answer againSources
- 2025 Form IL-1040 Instructions (Illinois Department of Revenue): https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-instr.pdf
- 2025 Schedule NR IL-1040 Instructions (Illinois Department of Revenue): https://tax.illinois.gov/content/dam/soi/en/web/tax/forms/incometax/documents/currentyear/individual/il-1040-schedule-nr-instr.pdf
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Government Publishing Office, 2023 edition): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.