Illinois taxes capital gains as ordinary income — up to 4.95% — stacked on top of federal tax, so selling appreciated real estate can cost roughly ~28.8% of the gain. A 1031 exchange into a Delaware Statutory Trust lets Illinois investors defer that combined bill and trade active landlording for passive institutional real estate.
The Illinois tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| Illinois income tax (4.95%) | $74,250 |
| Total if you simply sell | $431,250 |
| Tax if you 1031 into a DST | $0 deferred |
In Illinois's top bracket, roughly the combined rate above goes to tax if you sell outright — versus $0 now with a qualifying 1031 exchange. Run your Illinois numbers →
Illinois 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
Illinois conforms to IRC §1031, so a qualifying exchange defers Illinois tax as well as federal tax.
Withholding at sale
Illinois may require nonresident withholding at closing; a qualifying 1031 exchange generally defers it. Confirm specifics with your closing agent.
How gains are taxed
Taxed as ordinary income — up to 4.95%.
Illinois market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in Illinois
Realized (acquired, held, sold) programs on Illinois assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| Pointe Plaza Shopping Center — Niles | Syndicated Equities | 6.50% | 1.17x | 2.49 yr |
| Ravinia Plaza Shopping Center — Orland Park | Syndicated Equities | 9.05% | 1.31x | 3.12 yr |
| Le Meridien Hotel — Chicago | Syndicated Equities | 68.58% | 1.69x | 1 yr |
| Walgreens — Hickory Hills | Syndicated Equities | 11.85% | 1.68x | 4.63 yr |
| Volkswagen Distribution Facility — Libertyville | Syndicated Equities | 4.57% | 1.45x | 8.32 yr |
| 309 Green Street — Champaign | Syndicated Equities | 15.04% | 1.30x | 1.87 yr |
| Walgreens — Chicago | Syndicated Equities | 7.15% | 2.14x | 11.01 yr |
| Metropolitan Place Retail — Chicago | Syndicated Equities | 6.62% | 1.78x | 9 yr |
See every Illinois deal in the Data Center →
Current offerings for Illinois investors
| Offering | Sponsor | Type | Status |
|---|---|---|---|
| ExchangeRight Net-Leased All-Cash 19 DST | ExchangeRight | Net Lease | Limited Availability |
| NexPoint Marina DST | NexPoint | Marina | Available |
DST sponsors based in Illinois
Learn more
Illinois FAQ
What is the capital gains tax rate in Illinois?
Illinois taxes capital gains as ordinary income, up to 4.95%, with no separate long-term rate. Combined with the federal 20% rate and the 3.8% net investment income tax, a high-bracket Illinois seller can face roughly ~28.8% on a real estate gain.
Does Illinois recognize 1031 exchanges?
Yes. Illinois conforms to IRC §1031, so a properly structured exchange defers Illinois tax as well as federal tax.
Why use a 1031 exchange in Illinois?
To defer the tax on a large gain (up to about ~28.8% combined) and move from active landlording into passive, professionally managed real estate while keeping your full equity invested. These are Regulation D offerings for accredited investors.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.