Illinois is one of the few states that exempts all retirement income — Social Security, pensions, IRA distributions, 401(k) withdrawals. Texas has no income tax. So the comparison isn't as simple as "Illinois taxes retirees, Texas doesn't." Here's what the numbers actually show.
Most Texas retirement marketing pitches a simple story: "Illinois taxes your income at 4.95%. Move to Texas and save thousands." For working-age residents, that's accurate. For retired Illinois residents drawing from Social Security, pensions, IRAs, and 401(k)s, it's not. Illinois exempts all of those sources from state income tax. The income tax savings from moving are often zero — and property taxes may actually increase.
Have questions about what you're reading? A specialist can walk you through real costs, honest comparisons, and what's actually available right now — free, no obligation.
Talk to a Specialist →Illinois levies a flat 4.95% income tax on most income. However, the Illinois Income Tax Act exempts the following from state taxation:
For a typical retiree drawing exclusively from retirement accounts and Social Security — which describes the large majority of 55+ community buyers — Illinois state income tax on retirement income is effectively zero. The 4.95% rate applies to earned income (wages, business income), not to retirement distributions.
This is the Illinois-to-Texas comparison that competitors never publish. Texas "no income tax" marketing is technically accurate but misleading for retirees who have already left earning income behind.
The advantage isn't zero. It's just different from what most Texas marketing suggests.
Investment income and non-qualified distributions. If you have taxable brokerage accounts generating dividends, capital gains, or interest — or if you're drawing from non-qualified annuities — Illinois taxes those at 4.95% and Texas does not. For retirees with significant taxable investment income, the Texas advantage is real.
Roth IRA distributions. Federal law already makes Roth distributions tax-free, but some states tax them differently. Texas taxes nothing.
Part-time or consulting income. If you're retired but still earning some income — consulting, board work, rental income, side projects — Illinois taxes that at 4.95% and Texas does not.
Estate planning considerations. Illinois has a state estate tax starting at estates over $4 million, with rates up to 16%. Texas has no state estate tax. For wealthy Illinois residents planning large estate transfers, Texas is substantially more favorable.
Illinois property taxes are high by national standards. The median effective property tax rate is approximately 2.0–2.5% statewide, with Cook County (Chicago suburbs) often at 2.0–2.2%. This is higher than most states.
Bexar County property tax runs 1.8–2.3% — similar to Chicago suburbs. For 65+ buyers with the 2025 Bexar exemptions, the effective rate drops considerably.
But many Illinois retirees are in smaller cities or rural counties where effective rates are 1.5–1.8% — lower than Bexar County's base. And Illinois offers various circuit breaker programs and property tax exemptions for seniors that can further reduce liability.
| Scenario | Illinois Home $300K, Chicago suburbs | San Antonio Home $400K, 65+ Bexar | Annual Tax Difference |
|---|---|---|---|
| Property tax rate | 2.1% (Cook County est.) | ~1.7% (with 65+ exemptions) | SA saves ~$600–1,000/yr |
| Annual tax bill | $6,300/year | $6,800/year | IL cheaper by ~$500/yr |
| Income tax on $70K retirement income | $0 (IL exempts) | $0 (no TX income tax) | Neither wins |
| Net annual difference | Very small — often $0–$1,000 either way |
We connect buyers with agents who know this market from the inside — real cost math, honest comparisons, and what's actually happening right now. Every agent is personally vetted by the Nova55Living founder. No scripts, no pressure.
For most Illinois retirees moving to San Antonio, the financial case is not as compelling as the marketing suggests — but it's not negative either. It's roughly neutral on taxes.
What actually drives the move is non-financial:
Property tax increase on a higher-priced home. If you're selling a $250K Illinois home and buying a $450K Hill Country Retreat resale — which is a reasonable scenario for equity-flush Chicago-area sellers — your property tax bill likely increases in absolute dollars even at a lower rate. Model the actual numbers, not the rate comparison.
Kendall County MUD. If you're attracted to Regency at Esperanza and coming from Illinois thinking Texas taxes are lower, the Kendall County MUD will surprise you. The 2.4–2.7% effective rate at Esperanza is higher than many Illinois suburban rates, and without the senior exemption benefit Bexar County offers. Understand what you're moving into.
Illinois estate planning implications of moving. If you have significant Illinois-based assets (trust structures, business interests, real property in IL), changing domicile to Texas requires careful coordination with a tax attorney. Moving doesn't automatically remove Illinois estate tax exposure on Illinois-sited assets.
San Antonio is a good destination for Illinois retirees, but the financial case is more nuanced than "escape Illinois taxes." If you're drawing only from Social Security, pensions, and retirement accounts, you were already paying zero Illinois state income tax. The move saves you nothing on income taxes and may cost you slightly more in property taxes — or roughly break even, depending on Illinois county.
The real case for the move: climate, housing affordability (vs. Chicago metro), quality of life, and the availability of well-built 55+ communities with genuine amenities at prices Illinois suburbs can't match. Those are legitimate and sufficient reasons. Just go in with honest numbers.
Connect with a specialist who knows this market from the inside — real cost math, honest community comparisons, and what's actually happening right now. Every agent is personally vetted by the Nova55Living founder.
Connect with a Specialist →