Taxes on Selling a House in Illinois: What to Expect

Capital gains tax

Matichyn says it’s important to plan ahead and know what to expect before you list your home for sale. She cautions that there’s one big tax that can catch homeowners by surprise if they’ve only lived in a home for a short time.

“Capital gains tax, especially if you lived in the home for two years or less, can be a hefty tax that you may have to pay,” Matichyn says.

When you sell your home for more than its adjusted cost basis, the profit is known as a capital gain. To calculate it, combine your original purchase price with the cost of eligible capital improvements, then subtract that total and any qualifying selling expenses from the sale price. The amount left over is your capital gain, but whether you owe taxes on it depends on your individual circumstances.

For example, you bought your Illinois home for $145,000 years ago, spent $25,000 on capital improvements over the years, and then sold it today for $315,000 after paying $20,000 in selling expenses. Your capital gain would be $125,000 before any applicable exclusions or adjustments. This amount may be subject to capital gains tax.

State capital gains tax

Illinois taxes capital gains from selling a home as part of your regular state income, rather than applying a separate capital gains tax rate. The state’s individual income tax rate is a flat 4.95%, which generally applies to taxable gains included in your Illinois income.

Federal capital gains tax

Meanwhile, at the federal level, gains can be considered either short-term or long-term:

The 2026 capital gains tax brackets determine the rate applied to any taxable gain from your home sale. Understanding where you fall can help you plan and protect more of your proceeds.

2026 short-term capital gains tax brackets

2026 long-term capital gains tax brackets

Capital gains tax exclusion

Both the IRS and the state of Illinois provide a capital gains tax break for home sellers who meet certain conditions. Illinois generally follows federal adjusted gross income, so gains excluded under the federal home-sale exclusion generally aren’t subject to Illinois income tax either.

If some of your gain remains taxable, you’ll generally report it on your federal return, and the applicable amount will flow into your Illinois income tax calculation.

“If you lived in the home for at least two out of the last five years before the sale, you may qualify for exclusion up to $250,000 of the gain for a single taxpayer and $500,000 for a married couple who are filing jointly,” Matichyn explains.

To qualify for the full exclusion amount, according to IRS Publication 523, the following criteria must be met:

• You’re selling your primary residence.
• You’ve owned the home for at least two years in the five years before selling it.
• You’ve lived in the home for at least two years within the five years before selling it, but those years don’t have to be back-to-back. Exceptions may apply if you’re disabled or serve in the military, Foreign Service, intelligence community, or Peace Corps.
• You didn’t acquire the home through a like-kind exchange, also known as a section 1031 exchange, within the past five years. This is basically when you swap one investment property for another.
• You haven’t claimed the exclusion on another home in the past two years.
• You aren’t subject to expatriate tax, a government fee paid by those who renounce their citizenship or take up residency in another country.

If your property or circumstances don’t check all of the IRS exemption boxes, you may still qualify for a partial exclusion of gain. This can happen if the main reason for your home sale is a change in job location, a medical health issue, or an unforeseeable life event. For details on such circumstances, refer to IRS Publication 523.

If you’re going to be in a position to make a substantial profit, Matichyn recommends that you talk to a tax professional before [you] put your home on the market. “You’ll want to discuss this with your CPA. Find out what the tax will be, or what the amount or percentage you’ll have to pay, and if there are ways to reduce your costs.”

How to report your Illinois capital gains taxes

For your federal return, report your capital gains and losses by using the U.S. Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (IRS Form 1040). You can report your Illinois capital gains or losses on Illinois Form 1040.

Transfer tax

Illinois home sellers pay a transfer tax, which is a fee imposed by the state (and sometimes local governments) whenever a property changes ownership. It’s usually calculated as a percentage of the home’s sale price and is collected at closing to help fund government programs.

The state-mandated transfer tax is 50 cents per $500 of the sale price (or ​​one dollar for every thousand dollars). In addition, counties can impose an additional tax of 25 cents per $500 (or ​​50 cents for every thousand dollars).

For example, if you sell a home in West Chicago for $350,000, you’ll pay $350 to the state of Illinois and $175 to DuPage County, assuming the full sale price is taxable. Some municipalities also charge their own transfer taxes, so check the rates that apply to your specific property.

To learn more about Illinois’s real estate transfer tax regulations, procedures, and forms, visit the state’s Department of Revenue.

Property tax

In Illinois, the effective property tax on a home you live in is about 1.88% of its value. On an average $315,000 home, that comes out to roughly $5,922 a year. However, what you’ll pay exactly in property tax will vary by country.

“In Illinois, we pay property taxes a year behind,” Matichyn explains. “So a seller would have to give a credit to the buyers for the current year of them owning the home when the tax bill comes out.”

She adds that tax bills are sent out at different times of the year, depending on the county. “So if we’re closing on a home in September, the seller would have to give nine months’ worth of tax proration to the new buyer so [that] they can pay for the taxes whenever the tax bill comes out next year.”

Median property tax estimates by county

Here’s the annual median property tax you might expect to pay in Illinois’ largest counties:

• Cook County: $6,191
• DuPage County: $8,007
• Lake County: $8,923
• Will County: $7,173
• Kane County: $7,382
• Winnebago County: $3,930

In some smaller areas, the median property tax cost estimates are much less, such as Pope County ($1,477) and Hardin County ($1,001).

Matichyn says there are property tax exemptions, such as Cook County’s Homeowner Exemption, that can assist some property owners. “This is something that you can apply for when you’re looking to buy your primary residence.

“If you’re buying a home from an owner who has the home as a primary residence, a lot of times, you don’t have to apply. It just transfers over to you. It’s a good discount that every homeowner gets just by living in their home.”

She says there are additional tax incentives to seniors and veterans, which can also help lower taxes. “There are a lot of different ways to save on taxes. It just obviously depends on the specific situation and the county you are in. But if you’re buying an investment property, those incentives typically go away.”

A house-selling tax mistake to avoid in Illinois

Matichyn says one of the biggest mistakes she sees comes from homeowners who never research or question their property tax bills.

“I’ve seen quite a few properties where the taxes were high compared to what other homeowners pay in the area. The home is very similar, the square footage, all built around the same time, but one specific property will have really high taxes, which makes it harder for them to sell the house.”

She shares a situation where it turned out the seller’s home was being taxed unfairly.

“I had a home in [the] Northwest Suburbs priced at $600,000, and the taxes were $20,000, which is way too high for that specific area. (Everybody else in the area had like $14,000.) The county had the square footage wrong. The home had vaulted ceilings, and the county counted it as if there was a roof or a second floor above the first floor, like a family room, when, in fact, it was just air. The owners never looked into that, and they just kept paying the taxes.”

Matichyn adds, “This is public record. You can look up what your neighbors are paying in taxes, and if you feel like your bill is quite high or higher than it should be, you can always appeal your taxes.”

Inheritance tax

Illinois doesn’t charge beneficiaries an inheritance tax, so you won’t owe state tax simply for receiving money or property from someone who has passed away. However, the state does impose an estate tax, which is paid out of the deceased person’s estate before the remaining assets are distributed to the heirs. The good news is that it’s only applied to estates worth more than $4 million.

When you sell an inherited home, many of the same considerations apply as they do to selling any Illinois property, including property taxes. Where things differ is with capital gains.

Fortunately for heirs, the values of inherited assets are adjusted by what’s called a step-up in basis. This means that no matter how much an Illinois home has appreciated in value since it was originally purchased, a decedent’s heirs are not responsible for paying the taxes on those historical gains if they choose to sell the home. Rather, the property automatically converts to the current market value.

If an heir decides to sell the property right away for the assessed market value, then there are typically no gains. However, if an heir sells the property for more than the fair market value or chooses to hold onto the house for a while before selling, and its value continues to appreciate during that time, then those are usually considered taxable gains.

»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our Illinois Closing Cost Calculator to get a personalized estimate of your selling expenses and see your potential proceeds after closing.

Other selling expenses to anticipate in Illinois

Title fees: These consist of title insurance and a title search. Title insurance helps protect both the buyer and lender from potential problems with a home’s title. These issues could include things like forged documents, a previously unknown will, or restrictions on the deed that weren’t discovered during the title search. Who pays the title insurance can vary by state. 

The seller commonly covers the owner’s policy in most areas in Illinois. However, payment arrangements can vary by location and are negotiable between the parties.

Settlement fees: Also called escrow fees, settlement fees are usually 1% of the home sale value. This lump sum is charged by the title company, escrow company, or attorney handling the closing process. 

These fees typically cover the costs of preparing final documents, completing the transaction, and distributing payments to the appropriate parties. The exact amount and who pays these fees can vary depending on the agreement between the buyer and seller.

Agent commissions: Historically, sellers paid a total commission of around 5% to 6% of the home’s sale price, which was usually split between the listing agent and the buyer’s agent. But after the National Association of Realtors settlement changed how agent fees are handled, buyers now work directly with their agents to negotiate their own commission costs. 

For sellers, this typically means paying only their listing agent’s commission, which is often around 2.5% to 3% of the sale price, depending on the agreement.

Smart home prep to beat tax

Getting your home ready before putting it on the market can make a big difference in how buyers respond and how much you end up selling for. Even small updates and a little extra effort in presentation can help your property stand out in a competitive market.

Matichyn advises, “The best advice would be to make sure the home is prepared. Even though it is a seller’s market, it doesn’t mean that houses sell themselves. Even if it’s [in] a great area and [has] very desirable schools and a price range, the better the home shows, the more money the buyer is willing to pay for it.”

To get the highest price for your home, Matichyn says the preparations don’t need to be extreme. “We’re not talking about investing tens of thousands of dollars. Sometimes a deep clean would do, or having a Realtor come through and give you a staging recommendation, what to donate, what to keep in the house, what to pack up, how to make sure the home shows bigger, brighter, and more updated.”

Matichyn says she usually tells her clients to put themselves in the buyers’ shoes. “Are there some small things you could do to make the home feel more updated and move-in ready? Buyers will pay extra for the ability to move in and not do anything.”

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Ways to prepare for taxes after an Illinois home sale

Taxes after a home sale don’t need to be a surprise or intimidating. Some simple steps can help you prepare for what’s to come if you decide to sell a home in Illinois.

• Know your home’s value: One initial step is to use an online automated valuation model (AVM) tool like HomeLight’s free Home Value Estimator. Having a ballpark idea of what your Illinois home might be worth can help you calculate the potential capital gains from the home sale.
• Save the right documents: Know what tax documents you will need to sell before doing so. Consult with your tax advisor about the federal and state documents required to file and what tax breaks might be available for your selling situation.
• Find a top agent: An experienced Illinois real estate agent can walk you through the selling process, help you understand any tax implications, and guide you toward getting the most out of your sale. HomeLight data shows that the top 5% of real estate agents across the U.S. sell homes for as much as 10% more than average agents.

HomeLight makes it easy to find top-rated real estate agents in your Illinois market. We consider performance factors like the agent’s sale-to-list-price ratio and price trends in your city so that you can find top agents who will put more cash in your pocket.

If you’re buying and selling a home at the same time, check out HomeLight’s innovative Buy Before You Sell program. This modern buying solution unlocks the equity in your current home to streamline and simplify the entire process. You can make a stronger, non-contingent offer on your new home and only move once. Watch the short video below to learn more.

Learn more about selling a house in Illinois

Here are some helpful guides and reference links from HomeLight’s Seller and Buyer Resource Center:

• Understanding Illinois’s Transfer Tax: A Quick Guide
• Selling a House As-Is in Illinois
• Top We Buy Houses For Cash Companies in Illinois
• Recently Sold Homes in Illinois
• Illinois Single-Family Homes for Sale
• Newest Home Listings in Illinois
• Top Real Estate Agents in Illinois

Editor’s note: This post is for educational purposes only and shouldn’t be construed as financial or tax advice. If you need assistance navigating taxes, reach out to an advisor.

Writer Joseph Gordon contributed to the original version of this post.

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