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
Quick Access Tools
Frequently Asked Questions
Why is Schedule 1299-C important for transparency?
It maintains fairness within Illinois’s incentive programs. By recapturing credits when eligibility changes, the state ensures that incentives reward long-term economic activity rather than short-term gains. For taxpayers, it preserves credibility and helps avoid legal disputes with the Department of Revenue.
What documentation must accompany Schedule 1299-DA?
Attach copies of the other states’ filed tax returns, W-2s, or K-1s showing withholding and payments. Failure to attach proof can lead to denial of the credit. For convenience, you can track and upload copies directly through the MyTax Illinois portal.
K-12 education expense credit in IL?
Illinois offers a K-12 education expense credit (caps/eligibility apply). See the credits list in results.
Do unused credits carry forward to future years?
Most individual credits on Schedule ICR (Property Tax, Education Expense) apply only to the current tax year and cannot be carried forward. However, certain business-related credits listed on Schedule 1299-A can be carried forward or backward depending on statutory rules.
Saver’s Credit in IL?
The Saver’s Credit is federal; IL doesn’t usually add a separate state version.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.