Not tax advice. These are published state rules as of October 2026. Federal tax, local sales taxes, property taxes and your own income mix all matter. Talk to a tax professional before you decide.
Illinois vs. Arizona: state taxes
| Item | Illinois | Arizona |
|---|---|---|
| State income tax | Flat 4.95% (Illinois Department of Revenue). [source] | Flat 2.5% for all income levels and filing statuses [source] |
| Retirement income | Federally taxed Social Security and qualified retirement income (such as 401(k), IRA and pension distributions) can be subtracted (IDOR Pub-120). [source] | Social Security isn't taxed. Ask a tax professional how pension and IRA/401(k) withdrawals are treated; the flat 2.5% rate applies to Arizona taxable income. [source] |
| State sales tax | 6.25% on general merchandise; 1% on qualifying drugs and medical appliances; local taxes added (IDOR PIO-101). [source] | 5.6% state rate; county and city rates are added (ADOR rate table, Oct 1, 2026) [source] |
The short version
Illinois already exempts Social Security and most qualified retirement income, so a retiree living mainly on those may pay little Illinois income tax. Arizona doesn't tax Social Security, and its flat 2.5% rate applies to taxable income. Ask a tax professional how your pension and IRA/401(k) withdrawals would be treated in each state. Whether you save depends on your income mix. Taxable income that neither state exempts is taxed at 4.95% in Illinois versus 2.5% in Arizona. Talk to a tax professional.
Arizona facts that apply to every move
- State income tax: Flat 2.5% for all income levels and filing statuses
- Social Security: Not taxed by Arizona
- State sales tax (TPT, retail): 5.6% state rate; county and city rates are added (ADOR rate table, Oct 1, 2026)
- Property tax help for 65+: Maricopa County's Senior Valuation Protection can freeze a primary residence's Limited Property Value for three years if you qualify (Maricopa County Assessor).
- HOA and recreation fees are a real part of 55+ living costs. Compare them with the Cost to Live calculator.
- Summer cooling: July's normal high at Phoenix Sky Harbor is 106.5°F (NOAA). Budget for A/C. See the seasonal living guide.
Other states: California to Arizona · Washington to Arizona · Minnesota to Arizona · Moving to Arizona at 55+ · 55+ living by city
Frequently asked questions
Will I pay less state income tax in Arizona than in Illinois?
Illinois already exempts Social Security and most qualified retirement income, so a retiree living mainly on those may pay little Illinois income tax. Arizona doesn't tax Social Security, and its flat 2.5% rate applies to taxable income. Ask a tax professional how your pension and IRA/401(k) withdrawals would be treated in each state. Whether you save depends on your income mix. Taxable income that neither state exempts is taxed at 4.95% in Illinois versus 2.5% in Arizona. Talk to a tax professional.
Does Arizona tax Social Security?
No. The Arizona Department of Revenue lists Social Security retirement benefits as income Arizona doesn't tax.
What about property taxes and estate taxes?
They depend on the home, the county and your situation, so we don't estimate them here. In Maricopa County, homeowners 65+ may qualify for Senior Valuation Protection (the “Senior Freeze”). Ask a tax professional about estate and inheritance rules.
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Sources
Facts on this page were gathered from the sources below in October 2026. Third-party agent and listing sites are noted as such. Fees and rules change, so always check the association's current documents.
- Illinois: State income tax
- Illinois: Retirement income
- Illinois: State sales tax
- Arizona Department of Revenue: Individual Income Tax Highlights (2.5% flat rate)
- Arizona Department of Revenue: Individual Income Tax Information (Social Security exclusion)
- Arizona Department of Revenue: TPT Tax Rate Table (5.6% state rate)
- Maricopa County Assessor: Senior Valuation Protection