Illinois Estate Tax 2026: The $4 Million Cliff, Calculated

What the statute says

Section 2 of the Illinois Estate and Generation-Skipping Transfer Tax Act defines the tax by reference to a federal credit that no longer exists. The “State tax credit” for deaths after December 31, 2005 is the credit “as the credit would have been computed and allowed under the Internal Revenue Code as in effect on December 31, 2001,” without the later phase-out, but recognizing an exclusion of $2,000,000 for deaths before January 1, 2012, $3,500,000 for deaths in 2012 and $4,000,000 for deaths on or after January 1, 2013. Section 3(c) then sets the Illinois tax equal to that credit, reduced by the credit multiplied by the share of gross value without Illinois situs. The copy of the section we saved lists P.A. 97-636 (effective June 1, 2012) as the last amendment.

Three federal pieces make the arithmetic:

• The credit table. 26 U.S.C. 2011(b) caps the credit by bands of the “adjusted taxable estate,” which is the taxable estate reduced by $60,000. The band that matters first is $290,800 plus 11.2% of the excess over $4,040,000; the table has 20 steps and tops out at $1,082,800 plus 16% over $10,040,000.
• The limit. Section 2011(f) says the credit cannot exceed the section 2001 tax reduced by the unified credit. Illinois swaps its own $4,000,000 into that clause. The section 2001(c) tentative tax is $345,800 plus 40% of the excess over $1,000,000, so the tax on $4,000,000 is $1,545,800 (our arithmetic) and a dollar above it costs up to 40 cents before the loop below.
• The loop. Section 2058 lets an estate deduct state death taxes paid. The Illinois tax therefore shrinks the taxable estate it is computed on, and the Attorney General’s fact sheet says the tax “will be determined using an interrelated calculation.” We solve it by iteration: tax X equals the smaller of the table credit on (T minus X minus $60,000) and the section 2001 tax on (T minus X plus adjusted taxable gifts) less $1,545,800.

Where the limit binds, X = 0.40 × (T − X − $4,000,000), which is X = (2/7) × (T − $4,000,000). That is the 28.57%. Our reading of how Illinois combines these pieces is checked against the Attorney General’s examples in the next section; for a real return, run the Attorney General’s own calculator with Lines 3 and 5 of Form 700.

The Attorney General’s examples against our solver

All seven match, including the two that third-party summaries quote: about $285,714 at $5,000,000 and about $28 just over the line. The rounding rule that fits $28 is truncation to the whole dollar (the exact figure is $28.57). The fact sheet applies to decedents dying in 2023 and later; it is the current version on the Attorney General’s site.

The cliff, tabulated

“Cliff” is the wrong picture and the right worry. Nothing jumps at $4,000,000: the tax starts at zero and rises 28.57 cents per dollar. What it does mean is that the first $1.36 million above the line is the most expensive money in the Illinois schedule.

All figures in this table are our arithmetic, truncated to the dollar. The marginal column is the extra tax on the next $10,000, as a share of it. The 13.8% figure is the table’s 16% top band after the loop (0.16 divided by 1.16); it starts at a taxable estate of about $11,182,800. An estate that is just over the line pays little in dollars: $2,857 at $4,010,000 and $14,285 at $4,050,000. A $4,200,000 estate pays $57,142, which is an average of 1.36%. The filing requirement is a separate test on gross value, so an estate can owe a return and no tax.

Examples with a rental and fund interests

The Form 700 starts from the federal tentative taxable estate, minus any Illinois QTIP election, so Line 3 is the estate after debts, expenses and the marital and charitable deductions. Gross values for the apportionment fraction are not reduced by mortgages for which the decedent was personally liable (35 ILCS 405/5(c)). All cases below are our arithmetic from assumed facts.

The base case. An Illinois resident with a gross estate of $6,800,000: home $1,400,000, an Illinois rental building $2,200,000, fund and limited-partnership interests $1,000,000, IRA $1,500,000, cash and brokerage $700,000. Debts and expenses are $800,000, so Line 3 is $6,000,000.

The second row follows the statute: a resident’s transferred property has Illinois situs “except real or tangible personal property physically situated in another state” (35 ILCS 405/5(a)(1)), and the tax is reduced by the credit times the non-Illinois share (405/3(c)). The third row is our reading: an LLC or limited-partnership interest is intangible, so it is not real property in another state and stays in the Illinois column for a resident. For a nonresident (405/5(a)(2)) the only property with Illinois situs is real estate and tangible personal property physically situated in Illinois, and the fourth row uses just the building, with the preliminary tax of $926,923 on the whole $10,000,000 multiplied by 22%. Whether an entity that owns Illinois real estate is treated as real estate when its owner is a nonresident is not answered in the statute sections we saved; the Attorney General’s calculator and an Illinois attorney can answer it for a given structure.

The cash problem. The base-case tax of $456,071 is due 9 months after death. The assets include only $700,000 of cash and brokerage; the rest is a building, fund interests and an IRA. Unpaid tax carries 10% interest a year from the due date (35 ILCS 405/9), about $45,607 for a year on this tax (our arithmetic), plus a late-payment penalty of 0.5% a month up to 25% (405/8(b)). Section 6166 deferral can follow the federal rule, and the Attorney General says gross values, not adjusted values, set the share that can be deferred. Active-business tests are federal; passive rental holdings often do not meet them, so check before counting on it. How fund shares are valued and redeemed after death is a separate question we cover in our step-up in basis guide and our probate guide.

Gifts, spouses and portability

Adjusted taxable gifts enter Form 700 on Line 4. The section 2011(f) limit counts them; the table credit runs on the taxable estate alone. In our reading that means $2,000,000 given away during life and a $3,000,000 taxable estate owe $167,279, against $285,714 for a $5,000,000 estate held to death (our arithmetic). That is a statement about the formula, not about gifting: a gift gives up the income tax basis step-up and uses federal exemption, which the federal estate tax guide and the step-up in basis guide cover. Run the official calculator before relying on this.

Spouses. The Attorney General states that the portability and carry-over of the unused federal exemption “is inapplicable to the computation and assessment of the Illinois Estate Tax.” A separate Illinois QTIP election is allowed on a timely filed Illinois return (405/2(b-1)); the Attorney General’s own example shows a $13,610,000 estate with a $9,610,000 Illinois QTIP election owing $0.

The difference is $470,852 under assumptions that rarely hold: no growth, nothing out of state, and the first death’s $4,000,000 owing nothing. Trust design and the interaction with the federal exclusion of $15,000,000 for 2026 deaths belong to an estate-planning attorney. Our guide to the ILIT and SLAT and the family limited partnership guide describe tools couples use, and our Washington and Pennsylvania pages show how two other states build the same bill.

Return, deadlines and the federal layer

For deaths in 2026 the federal basic exclusion amount is $15,000,000 (Rev. Proc. 2025-32), so an Illinois estate between $4,000,000 and that figure owes the Illinois tax and no federal tax. Estates that owe federal tax deduct the Illinois tax under section 2058.

Dates to watch

• Pending bills. HB 16 and HB 1733 of the 104th General Assembly would change the exclusion. Search results for the Illinois General Assembly bill pages showed both stalled after a March 2025 referral to the Rules Committee, but the site was not reachable from our network on October 21, 2026 and we could not save those pages. Check the bill status before relying on $4,000,000 for a death in 2027.
• The exclusion is fixed by death date. The text has no indexing; a death on December 31, 2026 and one on January 1, 2027 use the same $4,000,000 unless the statute changes.
• The 9-month date runs from each death. A death on October 21, 2026 puts the return and payment due July 21, 2027.

What a reader can do with this

What the documents let you check before talking to anyone:

• Find Line 3. Add up everything owned, in a revocable trust, in an IRA or in a rental, take away debts and the marital and charitable deductions, and compare the result plus lifetime taxable gifts with $4,000,000.
• Read the grid. Between $4,000,000 and about $5,359,167 each extra dollar costs 28.57 cents; a deduction or a charitable gift in that band is worth the most.
• List what sits outside Illinois and how it is titled: a deed in another state is carved out; an LLC or fund interest is not.
• Compare the tax with the cash and the liquid assets available at month 9.
• Check the couple’s documents. Illinois has no portability, so what happens at the first death matters.

The decision, and who makes it. The estate plan is drafted by an estate-planning attorney and the Illinois and federal returns by the attorney or a CPA; appraisals of buildings and fund interests come from credentialed appraisers. A financial adviser’s part is which assets would be sold or redeemed to pay a tax that may be in the hundreds of thousands of dollars. Nothing here is a recommendation to change a plan.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 21, 2026: Illinois Compiled Statutes 35 ILCS 405/2, 3, 4, 5, 6, 7, 8, 9 and 10 (ilga.gov, Internet Archive copy); Illinois Attorney General Estate Tax Instruction Fact Sheet and Form 700 (rev. 10/24), illinoisattorneygeneral.gov; 26 U.S.C. 2001, 2010, 2056 and 2058, United States Code 2024 edition, and 26 U.S.C. 2011, United States Code 2000 edition (govinfo.gov); Rev. Proc. 2025-32 and the IRS What's New page for estate and gift tax (irs.gov). The solver, the grid and the examples are our arithmetic, with the assumptions stated, and were checked against the seven examples the Attorney General publishes. This is analysis of public documents, not investment, legal or tax advice.