I'm a dual US/UK citizen living in Illinois receiving a private UK employer pension -- can I subtract it from my Illinois income like an earlier Department letter suggested might be possible?

Plain-English summary

A married couple, both dual U.S./UK citizens living in Illinois, each receive a private pension from the same former UK employer. They'd been paying Illinois income tax on those pensions but believed that might be a mistake, citing an earlier Department General Information Letter (IT-23-0015-GIL) that suggested some UK pensions covered by the U.S.-UK tax treaty might qualify for Illinois's retirement-income subtraction. They asked for a Private Letter Ruling confirming their own pensions qualify.

The Department again declined to issue a PLR and responded with a GIL instead, reiterating that Illinois's treatment follows federal and treaty characterization, which Illinois itself does not independently determine.

Why the private UK pension doesn't qualify. Illinois's retirement-income subtraction (35 ILCS 5/203(a)(2)(F)) only covers amounts tied to specific U.S. Internal Revenue Code provisions -- Sections 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 408 -- which govern U.S.-organized qualified employee trusts, certain annuities, overseas-employee benefit plans, and individual retirement accounts. A private pension paid directly by a UK employer doesn't fit within that framework, so it is not eligible for the (F) subtraction.

The treaty doesn't change that conclusion. The U.S.-UK tax treaty (2001/2002) discusses pensions, social security, annuities, alimony, and child support in Article 17, and pension schemes in Article 18, with Article 24 addressing relief from double taxation. But Article 1(4)'s "saving clause" lets the U.S. tax its own residents and citizens largely as if the treaty didn't exist. The Department again emphasized that interpreting the treaty and federal law is "not the province of" Illinois's Department of Revenue.

What Illinois's own instructions say. The IL-1040 instructions (IDOR Publication 120) explain that a taxpayer may subtract only the federally taxed portion of a "qualified employee benefit plan" as defined in IRC Sections 402-408 -- and foreign pensions aren't mentioned in that guidance at all. Whether this particular UK pension counts as a "qualified employee benefit plan" turns on whether it actually fits within that IRC framework, which the taxpayer would need to establish.

What this means for you

Dual U.S./UK citizens (or any U.S. resident) receiving a private UK pension

Don't assume a prior, general GIL discussing "some UK pensions" automatically covers your specific pension. This letter shows the Department applying the same narrow test again: unless the pension fits within specific U.S. retirement-plan Code sections (402-408), it won't qualify for Illinois's general retirement-income subtraction -- treaty coverage of the pension for other purposes doesn't change that.

Taxpayers hoping a prior GIL on a similar topic settles their own situation

A GIL is non-binding even for the taxpayer it was issued to, let alone for a different taxpayer relying on it later. This letter is itself a second, later GIL on a similar question that reached the same restrictive conclusion -- treat an earlier informal letter as background reading, not a guarantee.

Accountants and tax professionals

This is now the second General Information Letter (after Canada, see the companion Illinois GIL on Canadian pensions from the same period) applying identical reasoning to a different country's private pension: federal/treaty characterization controls, only specific IRC sections (402-408) satisfy the general retirement-income subtraction, and the Department will not interpret the treaty itself. Expect the same analysis for private pensions from other countries as well.

Common questions

Q: Can I subtract my private UK employer pension from my Illinois income?
A: Generally no -- Illinois's retirement-income subtraction under 35 ILCS 5/203(a)(2)(F) is tied to specific U.S. Internal Revenue Code sections (402-408) governing U.S.-organized retirement plans, and a private UK employer pension doesn't fit that framework.

Q: Does the U.S.-UK tax treaty change this result?
A: Not by itself. The treaty addresses how the pension is taxed federally, but Illinois's specific subtraction still depends on whether the pension satisfies the IRC 402-408 framework, and Illinois doesn't independently interpret the treaty.

Q: I read an earlier Illinois letter suggesting some UK pensions could qualify -- can I rely on that?
A: Not automatically. A General Information Letter isn't binding on the Department even for the taxpayer who received it, and this later letter shows the Department reaching the same restrictive conclusion again on similar facts.

Q: What if I think my pension does fit within IRC Sections 402-408?
A: You'd need to establish that specifically -- the Department noted the determination depends on whether the plan fits that statutory framework, which is a fact-specific question about the plan's own structure.

Citations and references

Statutes and treaty provisions:

• 35 ILCS 5/203(a)(2)(F) (retirement-income subtraction tied to IRC §§ 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), 408)
• 35 ILCS 5/203(a)(2)(L) (Social Security/railroad retirement subtraction tied to IRC §§ 72(r), 86)
• Convention Between the U.S. and the U.K. for the Avoidance of Double Taxation (2001/2002), Article 1(4), Article 17, Article 18, Article 24

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2026.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2026/it26-0004-gil.pdf

Original ruling text

IT 26-0004-GIL 04/23/2026 Subtraction Modifications
Private foreign pensions do not qualify for the deduction for retirement
income unless included in federal taxable income under Sections 402(a),
402(c), 403(a), 403(b), 406(a), 407(a), and 408 of the Internal Revenue Code
(This is a GIL.)
April 23, 2026
NAME
ADDRESS
EMAIL
Re:

Tax deduction for a private pension funded from the United Kingdom

Dear: NAME
This letter is in response to your letter dated April 18, 2024, in which you
requested information. The Department issues two types of letter rulings. Private
Letter Rulings (“PLRs”) are issued by the Department in response to specific taxpayer
inquiries concerning the application of a tax statute or rule to a particular fact
situation. A PLR is binding on the Department, but only as to the taxpayer who is the
subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for
PLRs found in the Department’s regulations at 2 Ill. Adm. Code 1200.110. The
purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department
regulations or other sources of information regarding the topic about which they have
inquired. A GIL is not a statement of Department policy and is not binding on the
Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
https://tax.illinois.gov/ to review regulations, letter rulings and other types of
information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that
we respond with a GIL.
INQUIRY:
This letter is a request for a Private Letter Ruling with respect to the
Illinois taxation of the current UK private pensions currently in
receipt by myself and my wife. I understand that a ruling is allowable
when the same issue affects spouses who file taxes jointly.
My SSN is XXX-XX-XXXX I file my taxes jointly with my wife NAME1
(SSN XXX-XX-XXXX).

NAME
Page 2
April 23, 2026

I have seen this matter addressed in the GIL": IT-23-0015-GIL
08/03/2023 PENSIONS- FOREIGN PENSIONS" stating that some UK
pensions governed by U.S tax treaty with the United Kingdom may
qualify for the Illinois subtraction modification found in IITA Section
203(a}(2)(L), but have not found a definitive ruling.
Reason for Request
My wife and I are naturalized citizens of the United States, as well as
holding citizenship of the United Kingdom. We have filed US taxes
here jointly since YEAR. We have lived at our current address in
Illinois since YEAR1.
Since DATE I have been in receipt of a private Pension relating to my time
in employment by COMPANY in the United Kingdom for the period YEAR2YEAR1. This pension is paid to me by my old UK employer, COMPANY, on a
monthly basis. I have paid Illinois income tax on this pension income
since YEAR3, but I believe this may have been in error
Similarly, my wife NAME1 has been in receipt of an COMPANY private
pension since DATE1. and Illinois income tax has been paid on this
income also. as part of our joint tax return.
As we are US residents. and non-resident in the UK, the Tax Treaty
between the United Kingdom and the USA dictates that our United
Kingdom pensions are taxable In the US in the same manner as a USprovided pension. In accordance with the UK-US tax treaty, no tax is
deducted by the UK Revenue authority, leaving the full taxation of our
UK pensions from COMPANY to fall to the US Federal Tax authorities.
My understanding is that Illinois does not tax retirement pensions, but I
have not been able to find a definitive ruling that says Illinois either
does or does not tax either private retirement pensions or Government
funded pensions. paid from the United Kingdom. The GIL referenced
above does state that both UK private pensions and UK Government
funded State Pensions (ie UK equivalent of US Social Security) may be
entitled to the deduction for Illinois Taxation purposes, hence this
request for a Private Letter Ruling.

NAME
Page 3
April 23, 2026
I am, therefore requesting a Private Letter Ruling on the Illinois tax
treatment of our current private pensions from COMPANY for the
current (2024) tax year and subsequent tax years. pending any changes
to Illinois law, or to the expiration of the validity of such a ruling.
This is the first time I have submitted this request and, to the best of my
knowledge the Legal Department has not issued a prior ruling on this
matter. Nor is this matter the subject of an audit or any pending
litigation.
I have included in the appendix to this letter specific answers to the
eight questions as requested in CHAPTER XXI: DEPARTMENT OF
REVENUE, PART 1200 PUBLIC INFORMATION, RULEMAKING AND
ORGANIZATION, SECTION 1200.110 PRIVATE LETTER RULINGS.
DEPARTMENT’S RESPONSE:
The determination as to whether or not pension payments are subtracted from AGI in
the computation of Illinois base income depends upon how the benefits are treated
federally which in turn depends upon how the benefits are categorized under the USUK treaty and federal tax law. Whether or not a particular pension is subject to
international treaty, or how that payment is to be treated under federal tax law, is not
a determination made by the Illinois Department of Revenue.
35 ILCS § 203(a)(2)(F) provides as follows:
(F) An amount equal to all amounts included in such total pursuant to the
provisions of Sections 402(a), 402(c), 403(a), 403(b), 406(a), 407(a), and 408
of the Internal Revenue Code, or included in such total as distributions under
the provisions of any retirement or disability plan for employees of any
governmental agency or unit, or retirement payments to retired partners,
which payments are excluded in computing net earnings from self
employment by Section 1402 of the Internal Revenue Code and regulations
adopted pursuant thereto;
26 USC §§401-408 address various concerns connected with taxation of employee
trusts, exemptions, annuities, employee benefit plans for the benefit of overseas
employees of affiliates of the employer who created that plan, and individual
retirement accounts. Section 401 specifically refers to pension trusts “…created or
organized in the United States and forming part of a …pension…plan of an employer

NAME
Page 4
April 23, 2026
for the exclusive benefit of his employees or their beneficiaries shall constitute a
qualified trust under this section….”
35 ILCS §203(a)(2)(L) provides as follows:
(L) For taxable years ending after December 31,1983, an amount equal to all
social security benefits and railroad retirement benefits included in such
total pursuant to Sections 72(r) and 86 of the Internal Revenue Code;
Section 402 of the Internal Revenue Code deals with distributions from employee
trusts exempt under Section 401(a) of the Internal Revenue Code, which provides an
exemption for certain employee trusts “created or organized in the United States.”
Section 403(a) of the Internal Revenue Code deals with annuities described in
Section 404(a)(2) of the Internal Revenue Code, which describes certain annuities
purchased by employee trusts exempt under Section 401(a) of the Internal Revenue
Code.
Section 403(b) of the Internal Revenue Code deals with annuities for employees of
exempt organization.
Section 406 and 407 of the Internal Revenue Code deals with employee benefit plans
under Section 401 that cover overseas employees of affiliates of the employer that
created the plan.
Section 408 of the Internal Revenue Code deals with individual retirement accounts.
None of these provisions appear to apply to a retirement plan of a private employer
in England, and the pension income would therefore not qualify for subtraction under
IITA Section 203(a)(2)(F).
The Convention between the Government of the United States of America and the
Government of the United Kingdom of Great Britain and Northern Ireland for the
Avoidance of Double Taxation (a.k.a. UK-US Tax Treat (2001/2002) would appear to
be the relevant treaty between the United Kingdom and the United States.
Article 1, paragraph 4 of that treaty provides as follows:

4. Notwithstanding any provision of this Convention except
   paragraph 5 of this Article, a Contracting State may tax its

NAME
Page 5
April 23, 2026
residents (as determined under Article 4 (Residence)), and by
reason of citizenship may tax its citizens, as if this Convention
had not come into effect.
The Treaty discusses pensions, social security, annuities, alimony and child support
in Article 17, and pension schemes in Article 18. The Technical Explanation of the
Convention between the Government of the United States of America and the
Government of the United Kingdom of Great Britain and Northern Ireland for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to
Taxes on Income and on Capital Gains addresses the terms of the Treaty. Again, it is
not the province of Illinois Department of Revenue to interpret international treaties
and federal law. Lastly, Article 24 of the Treaty provides protection against double
taxation.
In your April 17, 2024, letter, you indicated that both you and your wife are dual
citizenship holders, being citizens of both the United States and the United Kingdom.
You stated that you have resided in Illinois since at least 2003. You began receiving
your pension from COMPANY on DATE, and your wife began receiving her pension
from the same employer on DATE1.
The instructions for the IL 1040 for line 5 describe the rules for adjustments to ‘base
income’ where pensions are backed out of Illinois taxable income. Foreign pensions
are not included in the descriptions. The relevant instruction in IDOR Publication 120
relates to IL-1040 Line 5, that “[w]hat retirement income may I subtract on Form IL
1040, Line 5…….You may subtract the amount of any federally taxed portion (not the
gross amount) including 401(k) plans reported on your U.S. 1040 or 1040-SR Line 5b.
NOTE: a qualified employee benefit plan is defined in Internal Revenue Code (IRC)
Sections 402-408. If you do not know whether your employee benefit plan is qualified
check with your employer.”
The determination as to whether or not the taxpayer’s pension is a “qualified
employee benefit plan,” as noted above, depends upon whether the pension fits
within the framework provided in IRC 401, 402-408. The pension plan must meet
these relevant statutory standards to possibly be considered exempt from taxation
in Illinois.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer
Information Division at 800-732-8866.

NAME
Page 6
April 23, 2026
Sincerely,
Javonna Ackerman
Associate Counsel (Income Tax)

Printed by the authority of the State of Illinois
Electronic Only - One Copy
Issued 04/23/2026, Redacted 5/14/2026