The state of Illinois has passed wide-sweeping legislation to increase tax rates for individuals and companies doing business in the state. The legislation passed on July 10, 2017, increases the corporate income tax rate from 5.25% to 7% for taxable years beginning on or after July 1, 2017, and increases the personal income tax rate from 3.75% to 4.95% for income earned after July 1, 2017.
- Along with the income tax increases, legislation included a few changes and additions to tax credits and deductions including:
- extending the sunset date of research and development credit from January 1, 2016, to January 1, 2022
- an increase in the maximum education expense credit from $500 to $750
- an increase of Illinois earned income tax credit (EITC) from 10% to 14% for federal EITC for taxable years beginning after 2016 and from 14% to 18% after 2017
- an additional credit against personal income tax liability for school instructors for the amount paid or $250 for supplies purchased
- established limits on the education expense credit and the 5% property tax credit on residential or personal income tax exemptions for those who have an adjusted gross income exceeding $500,000 filing join or $250,000 for all other taxpayers
HK tax partner Keith Habel, CPA, said, “While efforts have been made to decrease the overall impact of the burden of these higher tax rates through some of these additional credits, individuals and companies doing business inside the state of Illinois will see a net increase to their tax bill with this legislation.”
It will be very important for companies doing business inside of Illinois and individuals required to file Illinois income tax returns to seek out assistance from their tax advisors to ensure individuals, corporations and shareholders of pass-through entities are not surprised with a large tax bill at the end of the year. Look for more Illinois state tax updates as legislators continue to solve budget issues.