Illinois is one of the states that imposes a flat income tax rate rather than a progressive tax structure. The income statement tax rate was increased from 3.75% to 4.95% in 2017 to address the state’s budget deficit and boost revenue. It is important to note that some local jurisdictions in Illinois also impose additional income taxes on top of the state income tax rate, varying by location. It’s crucial for residents to be aware of both the state and local income tax obligations to accurately fulfill their tax responsibilities in Illinois. Illinois’ flat income tax rate means that every resident, regardless of income level, pays the same individual income tax rate of 4.95 percent. Nonresidents who work in Illinois also must pay income tax to the state, unless they live in Wisconsin, Iowa, Kentucky or Michigan.
Do I have to pay Illinois state income tax?
In the spirit of change and improvement, it’s worth looking back to see which states have truly embraced tax competitiveness since 2020, and which ones have lagged behind. Americans may be surprised to see just how much they are taxed for renting a car. Use these free tax calculator tools and get immediate answers to many of your personal tax questions. Read more on exemptions at this Illinois Revenue Department page. The telecommunications tax is a tax on services including home phone lines, cell phones, television service and internet. It varies by location, but is generally about 7% of the price of service.
Illinois state income tax rates
There are three electronic options to make payments for business income tax. More specifically, the state’s new budget takes effect at the start of Fiscal Year 2026, which falls on July 1. There will also be changes to the state’s gas tax rate, Chicago’s minimum wage and one big change that could be coming to the next hotel room you stay in.
state tax rates
- This tax replaces money lost by local governments when their power to impose personal property taxes was taken away.
- We consider you a farmer if at least two-thirds of your total federal gross income is from farming.
- This allows the corporate tax burden to be spread more evenly among companies with various revenue levels.
- To verify your combined sales tax rate (i.e., state and local sales taxes), go to the MyTax Illinois Tax Rate Finder at mytax.illinois.gov and select rates for January 2026.
- Illinois is among the states that caps the maximum capital stock tax liability a business may owe in a given year, but in the wake of the pandemic, lawmakers paused—and have yet to resume—a phased elimination of the tax.
Staying informed about these dates helps avoid penalties and interest on late payments. Employees working in Illinois must submit Form IL-W-4 so their employer can withhold the correct amount of tax from each paycheck. They should file a new Form IL-W-4 any time their withholding allowances change, such as when they become married or when they have children. A sale for resale transaction occurs when tangible personal property is sold to a purchaser (reseller) for the purpose of resale (this transaction is also referred to as a sale at wholesale).
eFile your Illinois tax return now
Illinois will impose the nation’s highest state and local taxes on residents in 2025, costing each household $13,099 – or more than 16.5% of their annual income – a new WalletHub report found. Illinois families will pay the highest combined state and local tax burden in the nation this year on the median U.S. income. That’s $13,099, which will consume more than 16.5% of their money. Prepaid sales tax on motor fuel — Motor fuel distributors file Form PST-1, Prepaid Sales Tax Return, monthly on the 20th day of the month following the month for which the return is filed.
7% long-term capital gains tax on profits above the state’s standard deduction. An additional 2.9% tax applies to gains that exceed the exclusion by $1 million. Based on this chart, New Hampshire taxpayers pay 9.7% of their total income to state and local taxes. One simple way to rank state tax burdens is by the percentage Travel Agency Accounting of all state residents’ total income that goes to state and local taxes. Previously, the tax rate was raised from 3% to 5% in early 2011 as part of a statewide plan to reduce deficits.
Like the personal income tax the federal business tax il state tax rate is bracketed based on income level, with eight corporate tax brackets. Based on this chart, New Hampshire taxpayers with median incomes pay 14.1% of their income in state and local taxes. Massachusetts taxpayers with the same median incomes pay less—11.8%. It’s likely that taxes take up more of a median income household’s income in New Hampshire because it doesn’t have a state income tax on wages graduated by income. Instead, it relies more on property taxes, which aren’t based on a taxpayer’s income.
Has Illinois recently changed its state income tax rates?
However, it’s important to keep in mind that not everyone pays the highest tax rate and that state income taxes don’t make up the whole picture when looking at the overall tax burden. As is the case for federal returns, the amount you’ll pay to your state is also a function of your filing status, whether you have dependents, and whether you qualify for tax deductions and credits. Illinois has some of the highest average property and sales tax rates in the country. The state uses a flat income tax rate but doesn’t tax retirement income or Social Security. As reported by VisaVerge.com, the flat income tax rate in Illinois is both a strength and a weakness.
What is Illinois’ standard deduction?
It’s important to look at your complete financial picture, including property taxes, sales taxes, and any local taxes, when deciding where to live. These reduce a taxpayer’s total tax bill by some amount, which is in contrast to tax deductions, which only reduce a taxpayer’s taxable income. For example, the Illinois Property Tax Credit is equal to 5% of Illinois property tax paid on a principal residence for single filers with an AGI of $250,000 or less and joint filers with AGI of $500,000 or less. If you paid $1,000 in property taxes in 2024, you could claim a credit of $50 on your income tax return, which equates to $50 less that you end up paying in taxes. Instead, capital gains are taxed as regular income in the state.
This can make a significant difference in your overall financial health. As of now, the Illinois state income tax rate stands at a flat 4.95%. This rate is applied uniformly to all residents, ensuring simplicity in tax calculations. For example, there is a use tax for out-of-state purchases used within the state.