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Updated on Monday, July 19, 2021
Illinois, commonly known as the Prairie State, has an average tax burden compared to other states. Overall, state and local income tax collections per capita rank Illinois 25th in comparison to other states, according to the Tax Foundation. Illinois charges a flat 4.95% individual income tax, up to an 11% sales tax depending on the locality and a 7% corporate net income tax.
Tax overview in Illinois
If you need help navigating the ins and outs of Illinois state taxes, a financial advisor may be able to assist and help minimize your Illinois tax liability. Consider contacting one of the best financial advisors in Illinois for more information, and read on for more information on Illinois taxes.
Income tax in Illinois
The state of Illinois taxes all taxable income at a rate of 4.95%. A study by the Tax Foundation found the top individual income tax rate in Illinois fell roughly in the middle compared to all states across the U.S.
Illinois allows you to deduct exemptions for yourself and your spouse, and for qualifying dependents. You may be eligible for additional exemptions if you are over the age of 65 or legally blind. Illinois also offers tax credits you may qualify for to reduce the tax you owe.
To determine your state income tax due, you’ll need to calculate Illinois state-specific additions and subtractions, which differ from your federal income tax return. You can calculate this information on Illinois Schedule M.
Illinois state income tax bracket
Illinois income tax has a single tax bracket as listed below. All taxable income is taxed at this Illinois tax rate.
|Illinois income tax rate|
Corporate income tax in Illinois
C corporations face a 7% net income tax in the state of Illinois. They must also pay a personal property replacement tax of 2.5% of net income. The Tax Foundation found that Illinois has one of the highest combined corporate tax rates in the country.
Partnership and S corporations do not directly pay state income tax. Instead, the income from these business types flows through to the individual shareholders’ or partners’ state income tax returns. Partnerships and S corporations do have to pay a 1.50% personal property replacement tax.
LLCs are taxed based on their underlying business structure, such as a partnership, S corporation or C corporation.
Property tax in Illinois
Property tax in Illinois isn’t managed by the state, but is instead governed by the localities. In total, around 6,000 local government units impose a property tax. These units include municipalities, townships, schools, park districts, counties and more. The Tax Foundation found that Illinois’ property taxes are the second-highest in the nation, coming in at an average of 2.05% of the owner-occupied housing value.
Taxes are paid the year after the assessment is made. For example, taxes are paid in 2022 for 2021 assessments. For all counties except Cook County, the tax assessment level of a property is 33.33% of the property’s fair market value, though this does not include farmland or farm buildings. Property is assessed every four years, except in Cook County, where it is reassessed every three years.
You may qualify for the General Homestead Exemption, which reduces the equalized assessed value by up to $6,000. Some localities have different rules: For example, seniors ages 65 or older may be eligible for an additional exemption of up to $5,000 ($8,000 in Cook County). In addition, seniors with an income of $55,000 or less may defer property taxes, with an added 6% interest, until they sell their home.
Sales tax in Illinois
Sales tax impacts goods purchased in the state of Illinois, making these purchases more expensive for anyone buying items in the state. The Illinois state tax rate is 6.25% on general merchandise and 1% on qualifying foods, drugs and medical appliances.
In addition, localities may add their own sales taxes to this rate. Some localities, like Alexander County, do not add any sales tax. The highest-taxed localities, including some areas of Cook County, may add up to 4.75% — this brings the total sales tax in the highest-taxed localities to 11%. The total sales tax burden results in the seventh highest average sales tax in the nation, according to the Tax Foundation.
Here are a few of the total sales tax rates in some Illinois cities:
|Total local sales tax rates in major cities in Illinois|
|City||Sales tax rate|
Estate tax in Illinois
The state of Illinois charges an estate tax on estates over $4 million after adjusted taxable gifts are included. It is one of 12 states, plus the District of Columbia, that levies this tax.
Below is the Illinois estate tax table, including tax rates, based on the adjusted taxable estate size.
|Illinois estate tax rate|
|Adjusted taxable estate|
|At least||But less than||Amount owed from brackets above||Plus percent owed on taxable estate in this bracket|
Inheritance tax in Illinois
Illinois charges an estate tax, as mentioned above. It does not have a separate inheritance tax.
Other taxes in Illinois
Alcohol and tobacco tax
Illinois charges a liquor gallonage tax based on the alcohol content within a beverage. Rates are as follows:
- $0.231 per gallon for beer or cider with alcoholic content 0.50% to 7%
- $1.39 per gallon for liquor other than beer with alcoholic content 14% or less
- $1.39 per gallon for liquor with alcoholic content greater than 14% and less than 20%
- $8.55 per gallon for liquor with alcoholic content 20% or greater
The cigarette tax is $2.98 per package of 20 cigarettes. There is also a 36% tax on the price of wholesale tobacco products, a 30 cent tax per ounce on moist snuff tobacco products and a 15% tax on the wholesale price of electronic cigarette products.
Further, the state of Illinois also charges taxes on cannabis products:
- 10% of purchase price for 35% or less THC level
- 25% of purchase price for 35% or more THC level
- 20% of purchase price for infused products
Gas taxes have increased in the state of Illinois as of July 1, 2021. Here are the current rates facing people that purchase these products in Illinois, effective through June 30, 2022.
|Illinois fuel tax rates|
|Product taxed||Tax rate|
|Gasoline or gasohol||$0.392 per gallon|
|Diesel fuel||$0.467 per gallon|
|Liquified petroleum gas (LPG)||$0.467 per gallon|
|Liquified natural gas (LNG)||$0.467 per gallon|
|Compressed natural gas (CNG)||$0.392 per gallon|
Illinois charges a use tax, which purchasers owe on taxable items for use in Illinois that they had not paid Illinois sales tax on before.
People that owe $600 or less of use tax over a year can pay the 6.25% use tax on general merchandise and 1% use tax on qualifying food, drugs and medical appliances on Form IL-1040, the state’s individual income tax form.
If you owe more than $600 of use tax, you’ll have to pay the tax faster — the use tax amount is due by the end of the month following the purchase. You’ll file the tax owed with Form ST-44, Illinois Use Tax Return.
Illinois does not have an intangible tax.
Unemployment tax, Illinois’s version of the reemployment tax, is charged on a taxable wage base of $12,960 in 2021. Currently, the minimum base rate is 0.2% and the maximum base rate is 6.4%. The specific rate a business pays is based on an employer’s track record with unemployment. In addition, the state charges a fund building rate of 0.475%, which is added to the rates mentioned above for all employers.
FAQs about taxes in Illinois
The state of Illinois says the following people may have to file an Illinois tax return to determine if they need to pay Illinois state income taxes:
- Illinois residents
- Illinois residents who worked in Iowa, Kentucky, Michigan or Wisconsin
- Retired Illinois residents
- Part-year Illinois residents
- Nonresidents that owe Illinois income tax or want to claim a refund
- Iowa, Kentucky, Michigan or Wisconsin residents who worked in Illinois
- Illinois residents claimed as a dependent on another person’s return
- Surviving spouse or representative of a deceased taxpayer
- Non-U.S. citizens and non-U.S. nationals
- Those owed a tax refund
Illinois considers you a full-year state resident for income tax purposes if you were domiciled in Illinois for the entire year. This means that the place you live and intend to return to after temporarily being away from home is located in the state of Illinois.
You may be a part-year resident if you establish Illinois residency during the year or moved out of the state during the year. In this case, you’d be required to fill out a nonresident and part-year resident tax return.
Illinois state income tax returns are due at the same time as your federal income tax return. In 2021, the federal income tax return deadline was extended to May 17, 2021, and Illinois followed suit. In a typical year, Illinois state income tax returns are due on April 15 unless the date falls on a weekend or holiday.
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