Illinois State Tax ― Personal Income Tax
Illinois’ personal income tax has a flat rate of 3% of a taxpayer’s net income. It applies to resident taxpayers who have Illinois-based income and have filed a federal income tax return. It also applies to resident taxpayers who have Illinois-based income that is greater than the Illinois exemption allowance, even if a federal return has not been filed.
Illinois residents who have worked in Iowa, Kentucky, Michigan, or Wisconsin must also file an Illinois state tax return and include any income earned from these states.
While certain types of retirement income are not taxed in Illinois, a retired taxpayer who has filed a federal return must also file an Illinois return.
When filing your Illinois state tax return, you must use the same filing status as your federal return. The filing statuses include: single, head of household, married filing jointly, married filing separately, and widowed.
The due date for filing an Illinois state income tax return is April 15th. Taxpayers are granted an automatic 6-month extension by using Form IL-505-I (Automatic Extension Payment for Individuals). However, this is an extension of time to file, not an extension for payment. To avoid late fees, any tax owed must still be paid by the original due date of April 15th.
Illinois State Tax ― Corporate Tax
Illinois’ corporate tax is composed of a flat 4.8% income tax, plus a 2.5% replacement tax (a.k.a. the Personal Property Replacement Tax) on net income. Corporate tax is imposed on all corporations with Illinois-sourced income, and it is filed using Form IL-1120 (Illinois Corporation Income and Replacement Tax Return).
Corporate income returns are due by the 15th day of the 3rd month following the end of the tax year. Automatic extensions may be granted for late filing, but not late payments. Form IL-505-B (Automatic Extension Payment) must be filed with the expected tax payment in order to avoid penalties.
To correct or amend a corporate tax return that has already been filed, use Form IL-1120-X (Amended Corporation Income and Replacement Tax Return).
Illinois State Tax ― Sales & Use Tax
The Illinois sales and use tax applies to merchandise used and/or consumed in Illinois.
The sales tax is charged to the customer/consumer and is collected by a retailer or service person. There are two rates for the Illinois state sales tax:
- 6.25% for general merchandise and vehicles
- 1% for certain food, drugs, and medical appliances
The “Home Rule sales tax” is administered by the Illinois Department of Revenue and enforced by home rule units (i.e. municipalities and counties). These rates range from 0.25% to 1.75% and are added onto the state sales tax rate (6.25%).
The “use tax” is charged when the appropriate sales tax was not collected, and it is paid directly to the Illinois Department of Revenue by the person who uses the merchandise. For example, if you purchase an item from out-of-state for use in Illinois and you pay less than the above sales tax rate, you must pay difference to Illinois.
The use tax is designed to evenly distribute the tax burden and to ensure fair competition for out-of-state businesses. It has the same rate of 6.25%. Illinois Use Tax can be filed with Form ST-44 (Illinois Use Tax Return).
Illinois State Tax ― Property Tax
Property tax in Illinois is a local (not state) tax imposed only on real property ― such as houses, land, and commercial buildings ― and based on a property’s value. It is a major source of revenue for local governments and it is the single largest tax in the state.
In general, everybody pays property tax: homeowners, commercial property owners, renters (indirectly to landlords), and leaseholders. Property taxes are regulated by about 6,900 local taxing districts (including counties, townships, municipalities, and school districts). Revenue collected from property tax goes to public schools, roads, libraries, and police and fire departments.
Illinois has a 2-year, 6-step property tax cycle:
- Assessment: Properties are appraised and values are assessed.
- Review of Assessments: County boards determine the correctness and fairness of the assessed values, and property owners may appeal assessments if they are unsatisfied.
- State Equalization: The Illinois Department of Revenue issues a state equalization factor based on county assessments.
- Levy: Taxing districts determine the amount of revenue that needs to be raised by property taxes.
- Extension: County clerks consider Step 3 (state equalization) and Step 4 (revenue needed to be raised) to compute tax bills and prepare the books for county collectors.
- Collection & Distribution: County collectors send out tax bills and collect tax payments, and then they distribute the funds to local governments.
A property may be subject to several different taxing districts, depending on its location. County clerks are responsible for determining the combination of taxing units and coming up with an aggregate rate for each tax code area. The aggregate rate (which will appear on the tax bill) is the combination of rates from the county, township, school district, city, and any other special districts.
Illinois State Tax Forms
Form IL-1040 (Illinois Individual Income Tax Return)
Schedule NR (Nonresident and Part-Year Resident Computation of Illinois Tax)
Form IL-1040-ES (Estimated Income Tax Payments for Individuals)
Form IL-505-I (Automatic Extension Payment for Individuals)
Form IL-1120 (Corporation Income and Replacement Tax Return)
Form ST-44 (Illinois Use Tax Return)
Illinois State Tax Resources
Illinois Department of Revenue: tax.illinois.gov
Find out if you are eligible to file state income taxes online using “IL-1040 Web File:” www.revenue.state.il.us/app/ifile/Eligibility
To file your Illinois personal income tax return for free using “IL-1040 Web File,” go to the following website: www.revenue.state.il.us/app/ifile
Current year Illinois personal income tax forms: tax.illinois.gov/TaxForms/IncmCurrentYear/Individual
Income Tax Refund Status Inquiry: www.revenue.state.il.us/app/refund/servlet/RefundStatus
Use the “Illinois Tax Rate Finder” to look up specific sales tax rates by location: www.revenue.state.il.us/app/trii
Publication 108 ― Illinois Property Tax Credit: tax.illinois.gov/Publications/Pubs/Pub-108
Illinois Tax Freedom Day is April 13th.