Illinois veteran taxes

Military retired pay in Illinois

Exempttax year 2025Sources 1, 2, 3

Illinois does not tax military retirement pay. On Form IL-1040, Line 5, taxpayers subtract the federally taxed amount received from a government retirement or government disability plan, including military plans, with no age or dollar limit stated (Department of Revenue Publication 120 and the 2025 IL-1040 instructions; 35 ILCS 5/203(a)(2)(F)).

Survivor Benefit Plan annuities

Check with the stateSources 1, 2, 3

The Department of Revenue’s Publication 120 and 2025 IL-1040 instructions do not mention Survivor Benefit Plan annuities or survivor benefits. The subtraction covers government retirement and disability plans, including military plans, and 35 ILCS 5/203(a)(2)(F) covers distributions under any retirement or disability plan for employees of a governmental agency, but neither says whether payments to a survivor are included.

Property tax relief for disabled veterans

Exemption or creditSources 4, 5

Illinois’ Standard Homestead Exemption for Veterans with Disabilities (35 ILCS 200/15-169) reduces the equalized assessed value (EAV) of the primary residence of a veteran with a VA-certified service-connected disability: $2,500 at 30% to less than 50%, $5,000 at 50% to less than 70%, and at 70% or more the first $250,000 of EAV is exempt (tax year 2023 and later). Veterans reapply each year with the chief county assessment office, except those rated 100% and permanently and totally disabled.

• Specially adapted housing (35 ILCS 200/15-165): up to a $100,000 reduction in assessed value for housing bought or built with federal specially adapted housing funds; it continues while the veteran, spouse or unmarried surviving spouse lives there.
• A property cannot receive the standard exemption in the same year as the specially adapted housing exemption or the Homestead Exemption for Persons with Disabilities.
• From tax year 2024, the home of a World War II veteran is exempt regardless of disability level.

Vehicle registration for disabled veterans

Fee waiver or discountSources 6, 7

Under 625 ILCS 5/3-609 (text in effect from July 31, 2026), a veteran with VA proof of a service-connected disability may register one passenger vehicle, one motorcycle or one second-division vehicle of 8,000 pounds or less without any registration fee: with plates for veterans with disabilities showing the international symbol of access if a licensed physician, physician assistant or advanced practice registered nurse certifies that the disability qualifies for disability plates, or with special plates without the symbol if the disability is rated 50% or more. Renewals need eligibility documentation unless the disability is permanent.

• P.A. 104-603, effective July 1, 2027, changes the section to allow up to 2 sets of these plates without a registration fee; subsection (e) sets a reduced fee for a second set for persons approved under the Senior Citizens and Persons with Disabilities Property Tax Relief Act.
• The Department of Veterans’ Affairs says the first set of Disabled Veteran plates is issued at no cost.