Illinois Schedule FD – Tax on Federally Taxed Distributions (2026)
Last reviewed: 2025-11-07
Use the Illinois Tax Form Calculator Schedule FD: Tax on Federally Taxed Distributions as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 Illinois state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.
Schedule FD is used to calculate Illinois tax on federally taxed distributions such as IRA, pension, and other qualified plan payouts that are included in federal adjusted gross income but not fully exempt under Illinois law. This form identifies which portion of your distribution remains taxable to Illinois after allowable subtractions. The result carries to Form IL-1040.
When You Must File Schedule FD
You must complete this schedule if you received a distribution from a federally taxed retirement plan, pension, annuity, or IRA and the amount included in your federal adjusted gross income exceeds the Illinois exemption for qualified retirement income. This often applies to early withdrawals, certain rollovers, or distributions from non-qualified plans.
How to Complete Schedule FD
- Enter the total federally taxable distribution amount from your federal Form 1040.
- Enter the Illinois exemption amount for qualified retirement income. Illinois exempts most qualified retirement income, but some distributions do not qualify (for example, early withdrawals before age 59½ or certain non-qualified pensions).
- Subtract the Illinois exemption from your total distribution to find the taxable portion for Illinois.
- Multiply the taxable portion by the flat Illinois rate of 4.95%. This is the tax due on federally taxed distributions.
Attach supporting federal documentation (Form 1099-R or Schedule 1) to verify amounts.
| 1 | Federally taxable IRA or qualified plan distribution | |
| 2 | Illinois exemption for qualified retirement income | |
| 3 | Net taxable amount for Illinois (Line 1 − Line 2) | |
| 4 | Illinois flat income tax rate (4.95%) × Line 3 |
Understanding the Illinois Retirement Income Exemption
Illinois law exempts income from qualified retirement plans, IRAs, government pensions, and certain disability benefits. However, not all distributions qualify for full exemption. Early withdrawals, lump-sum payments before retirement, or distributions from non-qualified deferred compensation plans may remain partially taxable. Schedule FD ensures these are accurately identified.
Why Schedule FD Is Important
Failing to correctly report distributions can lead to underpayment of Illinois tax or audit adjustments. For example, if you roll over part of an IRA and take a partial cash withdrawal, the cash portion must be tested for Illinois exemption eligibility. Schedule FD clearly shows how much, if any, of that income remains taxable in Illinois.
Examples
Example 1: You received a $20,000 pension distribution, all from a qualified plan. Illinois exempts the full amount, so no tax is due.
Example 2: You withdrew $10,000 from a traditional IRA before age 59½. Illinois does not exempt early withdrawals, so the entire $10,000 is taxable. At a 4.95% rate, the Illinois tax is $495.
Example 3: You received a $50,000 lump-sum non-qualified annuity distribution. Only $30,000 qualifies as retirement income; the remaining $20,000 is taxable to Illinois, resulting in a $990 tax obligation.
Compliance and Documentation
Always retain your 1099-R forms and any documentation showing the source and qualification of each distribution. Illinois requires supporting detail for each line item in Schedule FD. Filing this schedule ensures accurate reconciliation between federal and state income and protects you from underreporting penalties.
Last reviewed: 2025-11-07: If you believe this form requires an update, please contact us.
Related Forms and References
- Form IL-1040 – Individual Income Tax Return
- Schedule M – Additions & Subtractions
- Schedule ICR – Illinois Credits
- Official Illinois Schedule FD Instructions
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Frequently Asked Questions
Mortgage vs take-home planning
Try the Mortgage Calculator and revisit this IL page.
Where do I mail the completed IL-1040-V and payment?
Mail the completed voucher and payment to the address printed on the voucher (Illinois Department of Revenue, Springfield IL 62726-0001) unless told otherwise during filing.
Do charitable gifts affect IL tax?
IL doesn’t mirror federal itemized deductions; charitable gifts matter federally, not typically for IL base.
Why don’t my payroll brackets match?
Employer systems use rounding/timing and supplemental methods; small variances are normal.
Does Illinois tax Social Security or pension income?
No. Illinois exempts most retirement income—including Social Security, pensions, and IRA withdrawals—from state income tax. These subtractions are reported on Schedule M.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.