State taxes: Illinois

Illinois’ income tax is imposed on every individual, corporation, trust and estate earning or receiving income in the state. The tax is a flat percentage of a taxpayer’s federal adjusted gross income. More on Illinois taxes can be found in the tabbed pages below.

Personal income tax

The Taxpayer Accountability and Budget Stabilization Act, signed into law on Jan. 13, 2011, increased state income taxes on individuals and corporations and reinstated the Illinois estate tax.

Illinois taxpayers calculate their state liability by multiplying their income by a flat rate of 3.75%.

Many Illinois taxpayers may be able to electronically file their state returns by using IL-1040 WebFile.

Residents who cannot use the e-file system or who prefer paper forms can download them from Illinois Revenue.

Sales taxes

Illinois’ sales tax rate for general merchandise is 6.25%.

A reduced rate of 1% applies to qualifying food, drug and medical appliances.

Illinois allows several exemptions from tax. Publication 104, Common Sales Tax Exemptions, lists them. For a complete list of exempt transactions, see Illinois Administrative Code Section 130.120.

Effective each January and July, the local government sales tax rates may be adjusted. The latest revised local rates can be found online using the Illinois Tax Rate Finder.

Form IL-1040 includes a line for reporting Illinois use tax, which is the same 6.25% as the state sales tax.

Personal and real property taxes

Only real property (real estate) is taxed in Illinois. The revenue it produces is a major source of income for the state’s taxing districts.

The property tax is a local — not state — tax imposed by local government taxing districts, which include counties, townships, municipalities, school districts and special taxing districts.

Generally, the property tax cycle is a 2-year cycle. During the first year of the tax cycle, the property is assessed, reflecting the property value as of Jan. 1 of that year. During the second year, the actual tax bills for the prior assessment year are calculated and payments are collected from property owners (e.g., the tax for the 2014 assessment is paid in 2015).

Most property in Illinois is assessed at 33.33% of its market value, except for farmland. Farmland is not assessed on its market value, but on its ability to produce income. Contact the tax assessor’s office for exemptions and tax rates.

There are several homestead exemptions available for Illinois homeowners, including the following:

• General Homestead Exemption.
• Senior Citizens Assessment Freeze Homestead Exemption.
• Senior Citizens Homestead Exemption.
• Homestead Improvement Exemption.
• Disabled Veterans’ Homestead Exemption

In addition, the Senior Citizens Real Estate Tax Deferral Program allows people 65 years of age and older who have a total household income of less than $55,000 and meet certain other qualifications to defer all or part of the real estate taxes and special assessments on their principal residences. The deferral is similar to a loan against the property’s market value, and a lien is filed on the property in order to ensure repayment of the deferral.

Inheritance and estate taxes

There is no inheritance tax in Illinois.

Illinois’ estate tax for people who died in 2015 provides an exemption of $4 million. The estate value exemption for 2015 federal estate tax purposes is $5.43 million. Therefore, tentative taxable Illinois estates with adjusted taxable gifts between $4 million and $5.34 million will owe an Illinois estate tax without any corresponding Federal estate tax liability.

Other Illinois tax facts

Illinois residents who home-school their children can find detailed information about the state’s education expense credit in Publication 119.

Illinois collects taxes in more than 50 areas. In addition to the usual liquor, gasoline and cigarette taxes, the state taxes such things as aircraft use, food and beverages, and watercraft use. You can find details on all of them at the Illinois Department of Revenue website.

For more information, contact the Illinois Department of Revenue toll-free at (800) 732-8866 or (217) 782-3336 or visit its website.

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