Is retirement income received from the military calculated into child support under IL child support laws

It definitely should

Child support is governed by 750 ILCS 5/505 and the basic "rule of thumb" is that everything that is "income" is considered for child support purposes. It sounds like the two of you each have the physical custody of one of your children and the difference between your incomes is what child support is based upon -- a fairly common practice and probably a fairly sound principal (as long as the parties agree).

In Illinois, Illinois Supreme Court Rules require you both to file Financial Affidavits showing what your income and expenses (as well as assets and debts) are at the beginning of the divorce and an updated one before trial. Military pensions are a quasi asset -- it is the right to receive an income stream down the road and is also considered property. There is a Fourth District Appellate court Case In Re Rogers which stated that even though pension assets are divided via a Qualified Domestic Relations Order, that the income stream from that asset is considered in setting child support.

So the short answer is that her income from your pension should be considered. The income stream fromt he pension should also be considered in setting your child support obligation. The money she receives as part of your pension though will not be considered as part of your income -- she receives it and she pays taxes on it.