I am 60 years old, live and file taxes in Illinois. Inheritance amount is less than $500,000. I know that there are federal taxes involved, but there should be no IL state taxes. My brother filed and did not have state taxes applied on his inherited annuities
Illinois does not have an inheritance tax, so there is not tax upon receipt of the inherited annuity.
It doesn’t tax withdrawals from IRAs. The state doesn’t tax rollovers from a traditional IRA to a Roth IRA. It also doesn’t tax income from retirement annuities, 401(k) plans, 403(b) plans, 457 programs, retirement plans for self-employed people, government/military Thrift Savings Plans, railroad retirement benefits, Social Security, federal retirement savings bonds or pensions.
According to the Illinois Department of Revenue (IDOR), federally taxable distributions from non-qualified annuities are subject to Illinois income tax. Non-qualified annuities are funded with after-tax dollars. Non-qualified annuity income reported on Form 1099-R cannot be reported as a subtraction on IL-1040, Line 5.