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.