Moving from Illinois to Cincinnati & Dayton: The Honest Tax Picture

Illinois gets frequently cited as a state retirees should leave because of its 4.95% income tax rate. That framing is mostly wrong for retirees. Illinois exempts nearly all retirement income from state tax. The real reason Illinois retirees move is property taxes — some of the highest effective rates in the country. That's where Ohio wins. Here's the accurate comparison.

Critical correction: Illinois does NOT tax Social Security, pension income from most public and private retirement systems, or distributions from qualified retirement accounts (IRAs, 401(k)s) for retirees. The 4.95% flat rate applies primarily to earned income and some investment income. Illinois retirees moving to Ohio will often see little income tax savings. The financial case for moving rests almost entirely on property taxes.

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Income Tax: Illinois vs. Ohio for Retirees

Income Source	Illinois Treatment	Ohio Treatment (2026)	Net Difference
Social Security	Exempt	Exempt	$0 — same
Pension from Illinois TRS, SERS, IMRF	Exempt	Taxable at 2.75% (minus $200 credit)	Illinois wins — moving increases pension tax
Military retirement pay	Exempt	Exempt	$0 — same
IRA / 401(k) distributions	Exempt	Taxable at 2.75%	Illinois wins — Ohio taxes these, Illinois does not
Part-time / earned income	4.95%	2.75% (+ local city tax)	Ohio wins for earned income
Investment interest/dividends	4.95%	2.75%	Ohio saves ~$1,100 per $50K

The counterintuitive result: An Illinois retiree living on $28K SS + $32K Illinois Teacher Retirement System pension + $16K IRA withdrawals pays approximately $0 in Illinois income tax on all of it (SS exempt, TRS exempt, IRA distributions exempt). The same income in Ohio generates approximately $440/yr in Ohio income tax (pension and IRA portions only, at 2.75%, minus $200 credit). For this retiree, moving from Illinois to Ohio increases income taxes by $440/yr. The move still makes sense — but for property tax reasons only.

Property Taxes: Where Illinois Retirees Actually Save Big

Illinois has the second-highest effective property tax rate of any state — typically 2.0%–3.0% in the Chicago metro area and 1.5%–2.5% in downstate cities. This is where the financial case for leaving Illinois is overwhelming and real.

Location	Effective Rate	Tax: $350K Home	Tax: $450K Home
Chicago suburbs (Cook, DuPage, Lake)	2.0%–2.8%	$7,000–$9,800	$9,000–$12,600
Collar counties (Kane, Will, McHenry)	2.3%–3.0%	$8,050–$10,500	$10,350–$13,500
Downstate cities (Peoria, Springfield, Rockford)	2.2%–2.8%	$7,700–$9,800	$9,900–$12,600
Butler County OH (Bel Haven area)	~1.00%	~$3,500	~$4,500
Greene County OH (Beavercreek)	~1.35%	~$4,725	~$6,075
Montgomery County OH (Dayton)	~1.55%	~$5,425	~$6,975

DuPage County to Butler County on a $450K home:
Illinois (2.5%): ~$11,250/yr · Ohio Butler County (1.0%): ~$4,500/yr
Annual property tax savings: ~$6,750/yr
10-year savings: ~$67,500 — even after any Ohio income tax increase on IRA withdrawals

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Three Illinois-to-Ohio Scenarios

Scenario 1: Chicago Suburb Retiree, Public Pension

Income: $24K SS + $36K Illinois IMRF pension. Currently paying $12,000/yr in DuPage County property taxes on a $480,000 home. Moving to Bel Haven ($530K, Butler County).

Illinois income tax: $0 (SS exempt, IMRF exempt). Ohio income tax: ~$790/yr (IMRF becomes taxable in Ohio at 2.75%, minus $200 credit)
Illinois property tax: ~$12,000/yr. Ohio property tax: ~$5,300/yr. Savings: ~$6,700/yr
Net annual Ohio advantage: ~$5,910/yr ($6,700 property tax savings minus $790 new Ohio income tax)
10-year net advantage: ~$59,100

Scenario 2: Downstate Illinois Retiree, IRA Income

Income: $20K SS + $18K IRA withdrawals + $8K part-time earnings. Paying $5,200/yr property taxes on a $240,000 Peoria home (2.2% rate). Moving to Edinburgh Village ($336K, Montgomery County).

Illinois income tax: $0 on SS + IRA; $396 on earned income (4.95%). Ohio income tax: $0 on SS; $495 on IRA (2.75%); $220 on earned (2.75%) = $715/yr. Ohio income cost: +$319/yr
Illinois property tax: ~$5,200/yr. Ohio property tax: ~$5,208/yr (1.55% on $336K). Effectively identical
This move is financially neutral at these numbers. Value case must come from lifestyle, community quality, or lock-in before future Illinois rate increases

Scenario 3: Investment Income Retiree

Income: $20K SS + $60K investment dividends/interest (taxed at 4.95% in Illinois, 2.75% in Ohio). DuPage County home at $450K (2.5% = $11,250/yr taxes). Moving to Bel Haven ($530K, Butler County, 1.0%).

Ohio income tax advantage: ~$1,320/yr on investment income (savings of 2.2% on $60K)
Ohio property tax savings: ~$6,750/yr ($11,250 – $4,500)
Total annual Ohio advantage: ~$8,070/yr. 10-year: ~$80,700
For investment-income-heavy households, this is the strongest case for the move

Which Communities Make Sense for Illinois Transplants

Illinois movers should prioritize property tax reduction above all else — that's where the financial case is unambiguous. Butler County delivers the lowest rates:

Bel Haven — Butler County at 1.00%; maximizes property tax savings; detached courtyard homes; 55+ legal restriction
Liberty Grand Villas — Butler County; ranch condos with water views; professional management
Villas at Waterford Glen — Clermont County at 1.05%; the lowest total dollar tax bill in the market; good for buyers downsizing aggressively

Dayton-side communities in Greene and Montgomery counties offer lower property tax rates than most of Illinois — but the savings aren't as dramatic as Butler County, and if you're taking on some additional Ohio income tax (on IRA withdrawals or pension), the net financial case narrows.

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