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Here’s the mistake we see Illinois retirees make: they assume leaving a “high-tax” state means lower income tax. On retirement income, the opposite is true. Illinois fully exempts it; Oregon taxes it. The real case for this move is escaping Illinois property taxes — among the highest in the nation — not the income tax.
This surprises people. Illinois has a flat 4.95% income tax, but it fully exempts Social Security, pensions, and IRA/401(k) distributions — a retiree drawing entirely from those sources pays $0 in Illinois income tax. Oregon exempts Social Security too, but it taxes pensions and 401(k)/IRA withdrawals as ordinary income, up to 9.9%. So for a retiree with a meaningful pension or large withdrawals, moving from Illinois to Oregon increases income tax, often substantially. Do not move expecting income-tax relief; on that line, you’re giving something up.
The real reason to leave Illinois is property tax. Illinois property taxes average about 2.08% of value — second highest in the country. Oregon’s run roughly 0.84–1.08% and are capped by Measure 50. On a $400,000 home, that’s the difference between roughly $8,300 a year in Illinois and around $3,400–$4,000 in Oregon. That property-tax escape, plus no sales tax and the climate, is the honest case — and for a retiree on Social Security and modest withdrawals, it can outweigh the new income tax. For a big-pension retiree, it may not. Run the specific numbers.
| Factor | Illinois | Oregon |
|---|---|---|
| State income tax | Flat 4.95% — but retirement income exempt | 4.75%–9.9%; pensions/401(k) taxable |
| Social Security | Exempt | Exempt |
| Pension / 401(k) / IRA | Fully exempt | Fully taxable |
| Property tax (effective) | ~2.08% (2nd highest in US) | ~0.84–1.08%, capped by Measure 50 |
| State sales tax | ~8–10.25% with local | None |
| Estate tax | $4M+ exemption | $1M exemption |
Cutting your effective property-tax rate by more than half is the headline saving here, and it compounds every year you own. Buy an older Oregon resale and Measure 50 can hold your assessed value well below market on top of that — see the Measure 50 guide.
The Willamette Valley swaps Chicago winters and Midwest summers for mild, green four-season living, and Oregon’s zero sales tax beats Illinois’s high combined rates on everything you buy. Note the estate-tax catch, though: Oregon’s $1M exemption is far lower than Illinois’s, which matters for larger estates.
Favor communities outside the Portland local-tax zones (every community we cover except Summerplace qualifies), manage withdrawal timing, and weigh an older resale. And because Illinois retirees are giving up an income-tax exemption, the Washington side of the metro — no income tax at all — is especially worth a look; see the Vancouver vs. Portland tax guide. Start with the Oregon retirement tax guide.
Send us your income mix and your current Illinois property-tax bill — we’ll model whether the move saves you money or costs you, honestly.
Get your move analysisEducational summary, not tax or financial advice. State tax rules differ by individual situation and change over time; consult a tax professional. Figures are illustrative.