QSBS Exclusion (Section 1202) in Illinois 2026
Calculate your qsbs exclusion (section 1202) tax savings in Illinois. With Illinois's 4.95% top state tax rate, your combined savings are higher.
Illinois Tax Overview
Flat 4.95% (constitutionally mandated). No standard deduction. Second-highest property taxes (2.07%). Most retirement income exempt.
Illinois Income Tax Brackets (Single)
QSBS Exclusion (Section 1202) Savings Calculator for Illinois
Federal Savings
$1,100
22% bracket
Illinois State
$248
4.95% rate
Total Savings
$1,348
26.9% combined
At a 26.9% combined tax rate in Illinois, every $1,000 in deductions saves you $270 in taxes.
Savings by Tax Bracket in Illinois
Includes 4.95% Illinois state tax on top of federal savings.
Eligibility Requirements
Investors in qualified small business stock
- 1C-corp with <$50M assets
- 2Held 5+ years
- 3100% exclusion up to $10M
Illinois residents should verify that this deduction is also recognized on their state tax return for additional savings of up to 4.95%.
Common Mistakes to Avoid
- !Not meeting C-corp requirement
- !Selling before 5 years
- !Forgetting to claim the deduction on your Illinois state return (missing up to 4.95% additional savings)
Illinois Filing Tips
With no standard deduction, maximize pre-tax retirement contributions. Property taxes can exceed $10,000 annually. Illinois exempts most retirement income. Focus on property tax reduction strategies.
Required Tax Forms
File these forms with your federal tax return to claim the qsbs exclusion (section 1202). Illinois may require additional state-specific forms.
Other Tax Deductions in Illinois
Capital Loss Deduction
Investment
Tax-Loss Harvesting
Investment
Investment Interest Expense
Investment
Qualified Dividend Tax Rate
Investment
Opportunity Zone Investment
Investment
1031 Like-Kind Exchange
Investment
Installment Sale
Investment
NIIT Planning (3.8% Surtax)
Investment
QSBS Exclusion (Section 1202) in Neighboring States
Tax Calculators for Illinois Cities
Calculate Your Full Tax Savings in Illinois
Use our free tax calculators to optimize your entire tax return for Illinois.
Frequently Asked Questions
How much can I save with the QSBS Exclusion (Section 1202) in Illinois?
In Illinois, the qsbs exclusion (section 1202) can save you an estimated $1,348 per year on a $5,000 deduction. This includes $1,100 in federal tax savings and $248 in Illinois state tax savings at the 4.95% marginal rate. The national average savings is $100,000/year.
What is the Illinois state income tax rate?
Illinois has a flat income tax system with a top rate of 4.95%. Flat 4.95% (constitutionally mandated). No standard deduction. Second-highest property taxes (2.07%). Most retirement income exempt.
Who qualifies for the QSBS Exclusion (Section 1202) in Illinois?
Investors in qualified small business stock. The eligibility requirements are the same whether you live in Illinois or another state, as this is a federal tax deduction. However, your total savings will vary based on Illinois's 4.95% top state tax rate.
What tax forms do I need to claim the QSBS Exclusion (Section 1202) in Illinois?
To claim the qsbs exclusion (section 1202), you need to file Form 8949 and Schedule D with your federal return. Illinois residents should also check if the state allows this deduction on their state return for additional savings of up to 4.95%. Filing status affects your deduction limits and tax bracket.
Is the QSBS Exclusion (Section 1202) better in Illinois than in states without income tax?
Yes, Illinois residents benefit more because the state's 4.95% top income tax rate means the deduction reduces both your federal AND state tax liability. In states with no income tax (like Texas, Florida, or Nevada), this deduction only reduces federal taxes. Your combined rate of 26.9% means more savings per dollar deducted.
What is the standard deduction in Illinois for 2026?
Illinois's standard deduction is $0 for single filers and $0 for married filing jointly. With no standard deduction, maximize pre-tax retirement contributions. Property taxes can exceed $10,000 annually. Illinois exempts most retirement income. Focus on property tax reduction strategies.
Related Calculators
Capital Loss Deduction in Illinois
Avg savings: $660/year
Tax-Loss Harvesting in Illinois
Avg savings: $5,000/year
Investment Interest Expense in Illinois
Avg savings: $1,500/year
Qualified Dividend Tax Rate in Illinois
Avg savings: $3,000/year
Opportunity Zone Investment in Illinois
Avg savings: $10,000/year
1031 Like-Kind Exchange in Illinois
Avg savings: $30,000/year