Illinois is a microcosm of the United States. From the suburbs of St. Louis, MO to the Grand Prairie to the grand city of Chicago, Illinois is so demographically diverse that it’s often referred to as “the most average state” because it represents almost every aspect of the country.
Chicago itself is the third largest city in the U.S., boasting the nation’s tallest building (Willis Tower, formerly known as the Sears Tower), the world’s largest public library (the Chicago Public Library), and of course, deep dish pizza.
Illinois is located in the heart of America. It is a transportation hub ― a national crossroads for air, train, road, and water traffic ― and it supports an agriculture industry that generates over $9 billion annually. It has 13 million residents and almost 7,000 units of government enforcing a range of taxes.
The following article describes the major components of Illinois’ tax system: the Personal Income Tax, the Sales and Use Tax, the Corporate Tax, Property Taxes, and other smaller taxes, as well as tax tips and information on how to file your returns.
TABLE OF CONTENTS
General Information About Illinois Tax Laws
- • Personal Income Tax
- • Sales and Use Tax
- • Corporate Tax
- • Property Tax
- • Other Taxes
Notable Changes In Policy/Legislation
Information About Filing Your Illinois Taxes
Tax Tips & Helpful Facts
GENERAL INFORMATION ABOUT ILLINOIS TAX LAWS
Illinois imposes three major state taxes (Personal Income Tax, Sales and Use Tax, and Corporation Tax) and one major local tax (Property Tax), along with other smaller taxes.
Personal Income Tax
Illinois’ Personal Income Tax is 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 IL-1040 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 IL-1040.
Part-year residents and nonresidents are required to file Form IL-1040 and Schedule NR if they have earned income from Illinois and/or would like a refund.
- Schedule NR is a “Nonresident and Part-Year Resident Computation of Illinois Tax.” It determines the amount of income that is taxable by Illinois and calculates the tax due. For instructions on this form, visit the following website:
For a downloadable PDF version of the Schedule NR, follow this link:
Illinois taxpayers must make estimated income tax payments if they expect their tax liability to exceed $500 (after subtracting any credits). Form IL-1040-ES, including instructions, can be found at the following website:
The due date for filing an Illinois Personal Income Tax return is April 15th. Taxpayers are granted an automatic six-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, the tax owed must still be paid by the original due date of April 15th.
Penalties are enforced for late payments. The penalty rate can be computed by the taxpayer using Form IL-2210.
In March of 2009, Illinois Governor Pat Quinn announced that he is considering raising the income tax rate to 4.5%, which would be the state’s first increase in twenty years. This proposal is a response to the declining economy and an attempt at tax system reform. It would also include new exemptions and eliminate certain business tax breaks.
Sales and 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 of 6.25%. For an alphabetized list of these local sales tax rates, visit this website:
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 or by using Web File.
For a complete directory of Sales and Use Tax forms, visit the Illinois Department of Revenue website:
The states of Illinois and Missouri are not charging sales tax on the $3,500 or $4,500 payments to dealers for the federal “Cash for Clunkers” program, a break that taxpayers of other states do not receive.
Corporate Tax
Illinois’ Corporate Tax is a flat rate of a 4.8% income tax, plus a 2.5% replacement tax (a.k.a. the Personal Property Tax Replacement Income Tax) on net income. It is imposed on all corporations with Illinois-sourced income, and it is filed using Form IL-1120 (Illinois Corporation Income and Replacement Tax Return).
Instructions for this form can be found at the following website:
Corporate income returns are due by the 15th day of the third month following the end of the tax year. Automatic seven-month extensions are 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.
Corporations that expect their tax liabilities to exceed $400 are required to make quarterly estimated payments. These payments are due on the 15th day of the fourth, sixth, ninth, and twelfth months of the tax year. This can be done using Form IL-1120-ES (Estimated Income and Replacement Tax Payment for Corporations).
To correct or amend a Corporate Tax form that has already been filed, use Form IL-1120-X (Amended Corporation Income and Replacement Tax Return).
For a full list of Corporate Tax forms, visit the Illinois Department of Revenue website:
