Updated October 24, 2026. Quick answer: Line 2 of the 2025 Illinois IL-1040 asks for a figure that comes from the federal return. The instructions say “Enter the amount of federally tax-exempt interest and dividend income reported on federal Form 1040, U.S. Individual Income Tax Return, Line 2a.”
What this line asks
The printed label is “Federally tax-exempt interest and dividend income from your federal Form 1040 or 1040-SR, Line 2a.” The instructions open the same way: “Enter the amount of federally tax-exempt interest and dividend income reported on federal Form 1040, U.S. Individual Income Tax Return, Line 2a.” Background on the federal side is in Form 1040 line 2a and 2b.
Who it applies to
The line is in Step 2, “Step 2: Income”, and is tied to income that is reported on the federal line named above. For a share that arrives through a pass-through entity, the instructions add: “Note: Your distributive share of federally tax-exempt interest and dividend income received from a partnership, S corporation, trust, or estate is added back on Schedule M, Line 2.”
Readers with interest and dividends can see the wider picture in Illinois tax on dividends and interest, and those with estate or trust income in Illinois tax on trust income.
What the instructions say to enter
| Step | What the instructions say |
|---|---|
| What to enter | “Enter the amount of federally tax-exempt interest and dividend income reported on federal Form 1040, U.S. Individual Income Tax Return, Line 2a.” |
| Where it comes from on the federal return | “Federally tax-exempt interest and dividend income from your federal Form 1040 or 1040-SR, Line 2a.” |
| Partnership, S corporation, trust or estate share | “Note: Your distributive share of federally tax-exempt interest and dividend income received from a partnership, S corporation, trust, or estate is added back on Schedule M, Line 2.” |
The figures the line prints
The instructions for line 2 print no dollar amounts or percentages, so there is no limit to carry from this line.
Where the result goes next
The amount is added with lines 1 and 3: “Total income. Add Lines 1 through 3.” The form also points to Schedule M for the partnership share: “is added back on Schedule M, Line 2.” See the Illinois IL-1040 line by line page for the neighbouring lines.
Edition and line numbers
This page reads the 2025 Form IL-1040 Instructions from the Illinois Department of Revenue, the current file served on 2026-10-24. Check the edition printed on your own form and use that edition’s line numbers.
Common mistakes
- Entering the federal taxable interest figure instead of the tax-exempt one. The instructions say “Enter the amount of federally tax-exempt interest and dividend income reported on federal Form 1040, U.S. Individual Income Tax Return, Line 2a.”
- Putting a partnership or trust share on line 2 itself. The instructions say “Note: Your distributive share of federally tax-exempt interest and dividend income received from a partnership, S corporation, trust, or estate is added back on Schedule M, Line 2.”
- Reading the line number from the wrong federal form. The form label reads “Federally tax-exempt interest and dividend income from your federal Form 1040 or 1040-SR, Line 2a.”
Related: Form 1040 line 2a and 2b, Illinois tax on dividends and interest, and Illinois tax on trust income.
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Answer againSources
- 2025 Form IL-1040 Instructions, Illinois Department of Revenue: tax.illinois.gov
- 2025 Form IL-1040 Individual Income Tax Return, Illinois Department of Revenue: tax.illinois.gov
Read from the state revenue documents linked above on October 24, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.