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Pub-120, Retirement Income

About this publication

Publication 120, Retirement Income, gives retirees detailed information about what retirement income they may subtract from their federal adjusted gross income when completing Form IL-1040, Individual Income Tax Return. The objectives of Publication 120 are to

  • identify what retirement income you may subtract on Form IL-1040, Line 5, and the line numbers on which this income is reported on your U.S. 1040 or 1040-SR.
  • identify federally taxed income you may not subtract.
  • list required attachments to Form IL-1040 for taxpayers who subtract retirement income on Line 5.

The information in this publication is current as of the date of the publication. Please visit our website at tax.illinois.gov to verify you have the most current revision.

This publication is written in the plain English style so the tax information is easier to understand. As a result, we do not directly quote Illinois statutes and the Illinois Administrative Code. The contents of this publication are informational only and do not take the place of statutes, rules, and court decisions. For many topics covered in this publication, we have provided a reference to the applicable section or part of the Illinois Administrative Code for further clarification or more detail. All of the sections and parts referenced can be found in Title 86 of the Code.

Taxpayer Bill of Rights

You have the right to call the Illinois Department of Revenue (IDOR) for help in resolving tax problems.

You have the right to privacy and confidentiality under most tax laws.

You have the right to respond, within specified time periods, to IDOR notices by asking questions, paying the amount due, or providing proof to refute the IDOR’s findings.

You have the right to appeal IDOR decisions, in many instances, within specified time periods, by asking for department review, by filing a petition with the Illinois Independent Tax Tribunal, or by filing a complaint in circuit court.

If you have overpaid your taxes, you have the right, within specified time periods, to a credit (or, in some cases, a refund) of that overpayment.

For more information about these rights and other IDOR procedures, you may write us at the following address:

Problems Resolution Office
Illinois Department of Revenue
PO Box 19014
Springfield, IL 62794-9014

Get forms and other information faster and easier at tax.illinois.gov.

Contents

  1. What retirement income may I subtract on Form IL-1040, Line 5, and where is it reported on my federal return?
  2. What federally taxed income may I not subtract?
  3. What must I attach to my Form IL-1040 when I subtract retirement income on Line 5?

What retirement income may I subtract on Form IL-1040, Line 5, and where is it reported on my federal return?

You may subtract the amount of any federally taxed portion (not the gross amount) included in your Form IL-1040, Line 1 that you received from

  • a qualified employee benefit plan including 401(k) plans reported on your U.S. 1040 or 1040-SR, Line 5b. Note: A qualified employee benefit plan is defined in IRC Sections 402 through 408. If you do not know whether your employee benefit plan is qualified, check with your employer.
  • railroad retirement income reported on your U.S. 1040 or 1040-SR, Lines 5b and 6b.
  • an Individual Retirement Account (IRA) (including amounts rolled over to a Roth IRA) or a self-employed retirement (SEP) plan reported on your U.S. 1040 or 1040-SR, Line 4b.
  • Social Security benefits reported on your U.S. 1040 or 1040-SR, Line 6b. Do not include Social Security withheld from wages shown on your Form W-2, Wage and Tax Statement.
  • a government retirement and government disability plan, including military plans, reported as wages on your U.S. 1040 or 1040-SR, Line 1z.
  • a state or local governmental deferred compensation plan paid under Internal Revenue Code (IRC) Section 457 and reported on your U.S. 1040 or 1040-SR, Line 1z or 5b.
  • capital gains on employer securities received in a lump-sum distribution, to the extent the gains are due to net unrealized appreciation on the securities at the time of distribution and reported on your U.S. 1040 or 1040-SR, Line 7.
  • retirement payments to retired partners reported on your U.S. 1040 or 1040-SR, Schedule 1, Line 5.
  • group term life insurance premiums paid by a qualified retirement plan or government retirement plan and included as wages on your U.S. 1040 or 1040-SR, Line 1z.
  • interest income realized on the redemption of U.S. retirement bonds reported on your U.S. 1040 or 1040-SR, Line 2b.

You may include early distributions from qualified plans and IRAs.

Note: For prior year returns, see the IL-1040 Instructions for that year for federal return line references.

What federally taxed income may I not subtract?

You may not subtract

  • income that is not from a qualified employee benefit plan. This includes income received
    • as third-party sick pay, or
    • from deferred compensation and disability plans that are not government plans.
  • any ordinary income from a qualified retirement plan for which you have elected to use the “Special 10-Year Averaging Method” on U.S. Form 4972, Tax on Lump-Sum Distributions.

What must I attach to my Form IL-1040 when I subtract retirement income on Line 5?

You must attach a copy of your

  • U.S. 1040 or 1040-SR, Pages 1 and 2 to support your subtraction for income from
    • qualified employee benefit plans, including 401(k),
    • railroad retirement,
    • IRA distribution,
    • converting a traditional IRA to a Roth IRA,
    • self-employed retirement,
    • Social Security benefits,
    • government retirement, including military plans,
    • governmental disability, including military plans.
      • Note: If your U.S. 1040 or 1040-SR Lines 4b, 5b, and 6b do not clearly identify the Social Security benefits and retirement income you are reporting on Line 5, you must attach a copy of Form 1099-R or Form SSA-1099, Social Security Benefit Statement, as applicable.
  • U.S. 1040 or 1040-SR, Pages 1 and 2, and Form W-2, Wage and Tax Statement, or Form 1099-R, showing the amount of state and local governmental deferred compensation paid under IRC Section 457.
  • U.S. 1040 or 1040-SR, Schedule D, Capital Gains and Losses, and Form IL-4644, Gains from Sales of Employer’s Securities Received from a Qualified Employee Benefit Plan, for a gain on the sale or exchange of employer securities.
  • U.S. 1040 or 1040-SR, Pages 1 and 2, and Schedule B, Interest and Ordinary Dividends, for redemption of U.S. retirement bonds.
  • U.S. 1040 or 1040-SR, Pages 1 and 2, and Form W-2, showing the amount of group term life insurance premiums paid by a qualified retirement plan or government retirement plan and included as wages on your federal return.
  • U.S. 1040 or 1040-SR, Pages 1 and 2, Schedule 1 and Schedule K-1-P, Schedule K-1-T, or any other notification identifying your share of the income received from a partnership, S corporation, trust, or estate including the payer’s name and federal employer identification number (FEIN) for retirement payments to retired partners.

Note: For prior year returns, reference the IL-1040 Instructions for that year.

Contact Information

Visit our website at tax.illinois.gov.
For specific phone number and email contacts see our Contact Us page.
Call us at 1 800 732-8866 or 217 782-3336.(TTY 1 800 544-5304)
Write us at Illinois Department of Revenue, PO Box 19001, Springfield, IL 62794-9001.
Call our 24-hour Forms Order Line at 1 800 356-6302.

(Pub-120 - April 2024)