Illinois residents pay a flat 4.95% state income tax on CD interest — a moderate rate, but one that meaningfully reduces the after-tax yield on CDs. The best CD rates available to IL residents reach approximately 4.44% APY in September 2026 through FDIC-insured online banks. Chicago-based Alliant Credit Union is also a standout national option available to Illinois residents (and anyone in the US).
Rates shown are as of September 2026 and change frequently. Verify current rates directly with the institution before opening.
Best CD Rates Available to Illinois Residents (September 2026)
| Institution | Type | 12-Month APY | Min. Deposit |
|---|---|---|---|
| Online banks (top-rate) | Online | 4.30–4.44% | $0–$10,000 |
| Alliant Credit Union | National CU (IL-based) | 3.75–4.25% | $1,000 |
| Wintrust Financial | IL community bank | 3.25–3.75% | $1,000 |
| Byline Bank | IL community bank | 3.25–3.75% | $1,000 |
| Traditional big banks | National bank | 0.01–1.00% | $1,000+ |
Illinois Flat Income Tax on CD Interest
Illinois has a flat 4.95% personal income tax on all income including CD interest. No deductions, credits, or progressive brackets — every Illinois resident pays the same 4.95% on CD earnings.
After-tax yield on a 4.35% APY CD for an IL resident (22% federal + 4.95% state):
- Total marginal rate: ~26.95%
- After-tax yield: ~3.18%
T-Bills vs. CDs for Illinois Residents
Treasury bill interest is exempt from Illinois state income tax.
| 12-Month CD (top rate) | 1-Year Treasury | |
|---|---|---|
| Gross yield | ~4.35% | ~4.37% (per Fed H.15, Sept 14, 2026) |
| Federal taxable | Yes | Yes |
| IL state taxable (4.95%) | Yes | No |
| After-tax yield (22% federal + 4.95% IL) | ~3.18% | ~3.41% (federal-only) |
In Illinois, the Treasury’s state tax exemption currently gives it a modest after-tax edge over the CD at these rate levels. Compare directly using the live 1-year Treasury yield before opening.
What $10,000 Earns at Top Available IL Rates
| Term | APY (top rate) | Gross Interest | After-Tax (22% federal + 4.95% IL) |
|---|---|---|---|
| 6 months | 4.25% | ~$210 | ~$154 |
| 12 months | 4.35% | ~$435 | ~$318 |
| 2 years | 4.35% | ~$889 | ~$649 |
Figures use the APY compounding convention: A = P(1+APY)^years.
Illinois Retirement Income Tax Exemption
Illinois does not tax retirement income — including IRA distributions, 401(k) distributions, and pension income from qualifying plans — regardless of age. This means:
- CD interest earned inside a Roth IRA: grows tax-free federally; distributions tax-free in Illinois
- CD interest earned inside a Traditional IRA: tax-deferred; distributions taxed federally but not by Illinois
- CD interest earned in a taxable account: taxed at 4.95% IL rate in the year earned
If you’re building savings for retirement, holding CDs inside a Roth IRA may be especially advantageous for Illinois residents because the 4.95% state tax is permanently avoided on qualifying distributions.
Notable Illinois Options
- Alliant Credit Union — Chicago-based; open to all US residents; NCUA-insured
- Wintrust Financial — Chicago-based community banking group; competitive institutional rates for larger deposits
- Byline Bank — Chicago-based; multiple IL branches; competitive CD rates for relationship customers
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