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Moving to Chicago - but worried about taxes!

As a CPA and financial advisor in Chicagoland, one of the questions I hear quite often is: “Seems like a nice place to live, but I’ve heard Chicago taxes will kill you.” In this blog we’ll cover the ins and outs of moving to Chicago from a tax and financial perspective. Stay tuned!


But first – hello! I’m Charlie.


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I help people retire in Chicagoland and across the country in a tax-efficient way. You may want to earmark these other blogs about financial planning (Chicagoland folks tend to find these useful.)



Let’s get into it!


Retiring in Chicago has tax benefits…and drawbacks

Depending on what stage of life you are in, it can be a wonderful thing to move to Chicago. There are tax benefits for senior citizens who retire in Illinois.


  • Any distribution from an IRA, 401(k) or other type of qualified retirement plan is not taxed in the state of Illinois.

  • Social Security benefits are not taxed in Illinois.

  • Many forms of pension income are not taxed.


However, as advantageous as the retirement income taxes are in Chicago, other forms of tax aren’t as pretty a picture. Property taxes in some areas, such as Cook County, Illinois, can be high(ranking as some of the highest in the country, depending on where you live) and hard to manage. Generally, the closer to Chicago you live, the higher the property taxes. If you are a retiree on a fixed budget, high or rising property taxes may compromise your ability to stick to your financial plan.


Other taxes to consider

Even if you aren’t retiring anytime soon, Chicago taxes still have an impact. People considering move to Chicago should also consider that:


  • Gas taxes are higher in Illinois. According to Tax Foundation, Illinois has the second highest gas tax rates in the country. If you are still working, or plan on traveling by car quite a bit, this is something to consider.

  • Income taxes in Illinois are a flat rate of 4.95%, and there is no city income tax in Chicago. This is an advantage for high earners who would be facing higher income tax rates in an tiered system.

  • While most stages do not tax food, Illinois does. Expect to pay grocery tax and sales tax on food. While the grocery tax is slated to be eliminated in 2026, municipalities have the option to reinstate it.

  • Sales taxes in Chicago are high at over 10%.


Seeing the bigger picture

There are many more aspects of your financial life than just the taxes you pay. People thinking of moving to Chicago (and especially if you are considering retiring there) should look at all the pros and cons. Think about where you’d want to live, and what the cost of living would be there.


There are advantages and drawbacks to living anywhere in the country. While you make a list of all the pros and cons of moving to Chicagoland, both financial and non-financial, also consider these questions:


  • What is the cost of living in Chicago for your lifestyle? How does that compare to where you currently live?

  • What will be the impact of this change on your biggest expenses: rent, healthcare, insurance, food, etc.?

  • What are your goals of moving, financially and otherwise?

  • Given your income, what kind of lifestyle would you be able to lead in Chicago? Is that the way you want to live?

  • What will the financial implications of this change be? Look at this both good and bad. Higher taxes, but would you be paid more? How would you manage the financial impacts?


It’s also a good idea to create a financial plan before making such a big life change such as moving to Chicago. It should take all the variables into account – taxes, your income streams, your expenses, any risks that are likely to materialize etc. Does moving to Chicago fit into your life today? Is it likely to still make sense in 5, 10, 20 years?


What exactly is a financial plan, by the way? We’re glad you asked! It typically includes:


  • Tax planning

  • Investment review

  • Investment management

  • Portfolio analysis

  • Insurance review

  • Estate planning collaboration with your attorney

  • Goals visualization

  • Year-end tax planning

  • College planning  

  • Budgeting  

  • Tax loss harvesting

  • Analysis of concentrated positions

  • Asset location for tax efficiency

  • Social Security

  • Medicare guidance

  • Charitable giving strategies

  • Tax amendments


Financial planning is essential because it gives you clarity about the resources you have and the obligations that you are facing. This gives you greater ability to make intelligent decisions, like moving to a different city or state.


Still on the fence?

My name is Charlie and I help people retire in a way that minimizes what they pay to Uncle Sam, whether they are retiring in Chicago or elsewhere. I am a CPA and a financial planner. If you’d like to set up a time to talk about tax-efficient retirement planning for people in Chicago or elsewhere, please schedule a time.

 

Sources

Cole. Gail. (2024, August 23rd). Illinois to eliminate state grocery tax as of January 1, 2026. Avalara. https://www.avalara.com/blog/en/north-america/2024/08/illinois-eliminates-state-grocery-tax-2026.html


Hoffer, Adam, and Macumber-Rosin, Jacob. (2024, August 6th). Tax Foundation. Gas Tax Rates by State, 2024 https://taxfoundation.org/data/all/state/state-gas-tax-rates-2024/



 
 
 

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