PEORIA, Ill. – A pair of state lawmakers from Peoria – one a Democratic senator and the other a Republican representative – stated they would vote to eliminate the current Illinois Estate Tax code during an Aug. 21 legislative breakfast at Bradley University.

“Personally, I think we ought to abolish the state estate tax, period,” said State Sen. David Koehler, a Democrat whose Family Farm Preservation Act, passed in 2024 (now sponsored by Sen. Doris Turner), increased the exemption amount that triggers the Illinois Estate Tax from $2 million to $4 million. Now, Koehler would like to see the estate tax “86ed” from the state’s tax menu entirely.

“People do leave Illinois because of the estate tax system,” he said. “You could have a 300-or 400-acre farm – not a large farm – and your assets could be over $4 million because of the equipment you have to have and the value of the land going up.”

Courtesy of Koehler’s legislation, which was sponsored in the Illinois House by Rep. Sharon Chung, of Bloomington, the Illinois estate tax now applies to estates valued above $4 million, with graduated tax rates ranging from 0.8 percent to 16 percent. However, as Chicago-area estate attorneys the Kravetz Law Group note on their website, the Illinois Estate Tax exemption amount of $4 million “drops like a cliff. One dollar below the line and you owe nothing. One dollar above it and your family could be looking at a tax bill in the tens of thousands. It’s one of the more punishing features of the Illinois tax code, and most families have no idea it exists until it’s too late to do anything about it.

“If your estate is worth $3.9 million, the tax bill is zero. If it’s worth $4.1 million, the tax isn’t calculated on just the $100,000 above the exemption. It’s calculated on the entire taxable estate, and the effective rate on that first $100,000 over the line can approach 100 percent. In practical terms, an estate valued at $4.1 million might owe roughly $100,000 in Illinois estate tax. Your heirs would actually net less than the heirs of someone whose estate came in at $3.9 million.”

While total estate tax data is hard to correlate, revenue amounts have increased significantly in Illinois during recent years, according to the Commission on Government Forecasting and Accountability. This makes the elimination of the tax a tough sell to many urban legislators.

“Between fiscal year 2012 and fiscal year 2020, receipts averaged more than $300 million annually. And in recent years, they’ve gone north of $600 million. Some growth can be attributed to a sharp rise in asset valuations,” Capitol News Illinois reported on March 24.

Illinois Estate Tax receipts are up 53 percent so far in fiscal year 2026, to $215 million, according to the commission, for which Koehler is a co-chair. In October 2025, the state brought in $180 million in estate tax revenue, a jump of 200 percent from the previous year, the commission reported.

Ryan Spain, whose term ends in January 2027 pending re-election in November, agreed that it is time to retire Illinois’ current estate tax code. “A major source of positive revenue and cash flow for the budget this year was a big influx in the estate tax line. (But) it is unusual for a week to go by without me having constituents coming forward and announcing their plans to leave the state,” he said.

“We have got to make some changes. We are increasingly seeing our farms being turned over to large corporate aggregations because the notion of passing on the family farm is burdened by estate tax penalties that are significant in Illinois. I’d like to see us on a path to get to parity with the federal estate tax threshold.” (The current federal estate tax exemption is $15 million per individual and $30 million per married couple, with a progressive tax rate of 18 percent to 40 percent.)

While it appears many Illinois legislators may indeed be ready to take the plow to the state’s estate tax-- which was first enacted in 1969-- Capitol News reported in March that Governor JB Pritzker acknowledged the issue has “not been a priority of mine. I think there are people who look at me and think (an) estate tax cut is not something that Pritzker should be the advocate for,” Pritzker said, acknowledging his billionaire status. “But I understand, very much so, how impactful it is in a negative way on farmers and on small businesspeople.

“And so, if we can put together a package that makes sense… then I do think it’s something that I could support as long as it includes the kind of tax break that I think is appropriate to preserving small farms and small businesses.”

Statehouse insiders speculated that for estate tax reform to pass the Illinois legislature in 2026 it would have to have been included in a larger revenue omnibus bill introduced in May’s closing session. Since this did not occur, it will be back to the drawing board in the 2027 legislative session for estate tax reform proponents. 

“Not only with the estate tax, I think our tax system needs to be drastically overhauled,” said Koehler. “The flat tax rate of five percent is fine for upper-level taxpayers, but it is very repressive in terms of working families. We need a progressive tax system like Wisconsin and Iowa and we need to have more predictable revenue. We could fund schools with income taxes, like Governor Jim Edgar tried to do, and less with property taxes.”

Current estate tax reform bills active in the Illinois legislature include HB 2865, which proposes a gradual phase-out of the estate and generation-skipping transfer taxes by 20 percent per year. IL SB 1828 would repeal the Illinois Estate Tax completely upon enactment, while other bills (HB 2601, SB 3847 and SB 1039) would increase the $4 million exemption while retaining the state’s estate tax.