Bank Gap by State
The Bank Gap in Illinois
Illinois taxes savings interest at a flat 4.95% rate regardless of income level, which makes the after-tax math simple to run even though living costs vary sharply between Chicago and the rest of the state.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before IL tax
$1,005/yr
on a $25,000 balance
After IL 4.95% tax
$955/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Illinois's 4.95% top income-tax rate on the additional interest, you keep about $955. Because Treasury interest is exempt from Illinois income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After IL tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $191 |
| $10,000 | $38 | $440 | $402 | $382 |
| $25,000 | $95 | $1,100 | $1,005 | $955 |
| $50,000 | $190 | $2,200 | $2,010 | $1,911 |
| $100,000 | $380 | $4,400 | $4,020 | $3,821 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After IL tax" column applies IL's 4.95% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Illinois changes the math
Illinois applies a flat 4.95% state income tax to interest income, with no separate top bracket for higher earners. Treasury interest is exempt from that tax, giving a modest after-tax edge to T-Bills that applies evenly across income levels since the rate itself doesn't rise with income.
Living costs in the Chicago metro run meaningfully above the rest of Illinois, so emergency-fund sizing — and the Bank Gap on it — looks different in Chicago than in the state's smaller cities and rural areas.
Cost of living in Illinois is near the national average outside the Chicago metro, which runs higher, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Illinois taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Illinois tax high-yield savings account interest?
Is a high-yield savings account worth it in Illinois?
Are T-Bills better than a HYSA for Illinois savers?
Your personal Bank Gap
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Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.