MHFA | Illinois Tax Hike — What You Need to Know
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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.