Updated October 24, 2026. Quick answer: Line 27 of the 2025 Illinois Schedule M names annuity benefits, so retirees read it closely. The instructions say “Enter the amount of payment of life insurance, endowment, or annuity benefits received before the time they would have ordinarily been paid as an indemnity for a terminal illness.” “This amount must be included in your Form IL-1040, Line 1.”
What this line asks
The form prints the label as “Payment of life insurance, endowment, or annuity benefits received.” The instructions open with a single sentence: “Enter the amount of payment of life insurance, endowment, or annuity benefits received before the time they would have ordinarily been paid as an indemnity for a terminal illness.”
The qualifying words are in that sentence, so read it through to the end before you decide the line fits your annuity. For ordinary annuity payments, see whether Illinois taxes annuity income and the IL-1040 line 5 retirement income subtraction.
Who it applies to
The form prints a condition above this group of lines: “Enter the following only if included in Form IL-1040, Lines 1, 2, or 3:” The instruction repeats the connection to your return: “This amount must be included in your Form IL-1040, Line 1.” The booklet adds a general rule for the whole schedule: “You may not subtract anything that is not listed on Schedule M.”
A 1099-R reader may want 1099-R box 2a for the federal taxable amount, then Illinois retirement taxes and whether Illinois taxes pensions for the state context.
What the instructions say to enter
| Step | What the instructions say |
|---|---|
| What to enter | “Enter the amount of payment of life insurance, endowment, or annuity benefits received before the time they would have ordinarily been paid as an indemnity for a terminal illness.” |
| Condition | “This amount must be included in your Form IL-1040, Line 1.” |
| Form label | “Payment of life insurance, endowment, or annuity benefits received.” |
Where the result goes next
Line 27 is one of the lines added on line 32, which the form prints as “Add Lines 13 through 31 and enter the amount here and on Page 3, Line 33.” Line 33 then carries it forward, and the schedule ends with “Add Lines 33 through 41. Enter the amount here and on Form IL-1040, Line 7.” See the Illinois IL-1040 line by line guide for the IL-1040 side.
Edition and line numbers
This page reads the 2025 Schedule M Instructions (IL-1040) and the 2025 Schedule M form 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
- Treating every annuity payment as a line 27 amount. The instructions limit the line to benefits “received before the time they would have ordinarily been paid as an indemnity for a terminal illness.”
- Entering an amount that is not on the IL-1040. The instructions say “This amount must be included in your Form IL-1040, Line 1.”
- Subtracting something because it feels like retirement income. The instructions say “You may not subtract anything that is not listed on Schedule M.”
Related: whether Illinois taxes annuity income, the IL-1040 line 5 retirement income subtraction, Illinois retirement taxes, and 1099-R box 2a.
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Answer againSources
- 2025 Schedule M Instructions (Other Additions and Subtractions for Individuals), Illinois Department of Revenue: tax.illinois.gov
- 2025 Schedule M Other Additions and Subtractions for Individuals, 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.