Illinois Tax Hike -- What You Need to Know

Illinois lawmakers recently passed a spending plan which includes a hike in Illinois income taxes for taxpayers. Here is a short overview of the changes:

• Tax Rates
  • As of July 1, 2017, the income tax rate changes from 3.75% to 4.95% for individuals, trusts, and estates and from 5.25% to 7% for corporations.
• Earned Income Tax Credit
  • As of January 1, 2017, the earned income credit changes from 10% to 14% of the federal earned income tax credit.
  • The Illinois earned income credit will increase to 18% of the federal earned income tax credit on January 1, 2018.
• Standard Exemption Allowance
  • Beginning on January 1, 2017, the personal exemption allowance cannot be claimed if the taxpayer’s adjusted gross income for the taxable year exceeds $500,000 for returns with a filing status of married filing jointly or $250,000 for all other returns.
• K-12 Education Expense Credit
  • The maximum amount of the credit increases from $500 per family to $750 per family for tax years ending on or after December 31, 2017.
  • The credit is not allowed if the taxpayer’s adjusted gross income for the taxable year exceeds $500,000 for returns with a filing status of married filing jointly or $250,000 for all other returns.
• Illinois Property Tax Credit
  • The credit is not allowed if the taxpayer’s adjusted gross income for the taxable year exceeds $500,000 for returns with a filing status of married filing jointly or $250,000 for all other returns for tax years beginning on January 1, 2017.
• Instructional Materials and Supplies Credit
  • This credit is new for tax years beginning on January 1, 2017.
  • It allows a credit equal to the amount paid during the taxable year for instructional materials and supplies with respect to classroom-based instruction in a qualified school, or $250, whichever is less, provided that the taxpayer is a teacher, instructor, counselor, principal, or aide in a qualified school for at least 900 hours during a school year.
• Domestic Production Activities Deduction
  • The Section 199 Domestic Production Activities Deduction must be added back to the adjusted gross income for individuals or taxable income for all other taxpayers when computing Illinois taxable income.
• Research and Development Credit
  • This credit has been reinstated retroactively for the 2016 tax year.

Don't hesitate to give us a call with any questions you may have about these changes.