Illinois Individual State Income Tax

Illinois' income tax is much simpler than in other states

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Illinois swims against the tide a little when it comes to state income taxes. As of 2017, it's one of only eight states that uses a flat tax rate rather than a progressive tax system where rates gradually increase as a taxpayer earns more. This leads some to think that Illinois doesn't actually have an income tax, but make no mistake—it does. People are just taxed differently here. 

Calculating Your Illinois State Income Tax 

Everyone pays the same tax rate in Illinois regardless of income. This simplified equation makes the state's tax returns much less complicated than those in most other states. 

The starting point for your Illinois return is your federal adjusted gross income or AGI. You'll find your AGI on line 37 of your Federal Form 1040, on line 21 of Form 1040A, or line 4 of Form 1040EZ. Your AGI represents your income after adjustments are made to it, such as deductions for student loan interest you paid and IRA contributions you might have made. It doesn't take into account any itemized or standard deductions, personal exemptions or tax credits you might be eligible for. 

Your "Base Income" 

That's the easy part. Next, certain types of income are added back to your AGI on your Illinois return, while other types of income are subtracted. All this results in what Illinois calls your “base income.” 

  • Add-backs are sources of income that are not included in your federal AGI but are taxable in Illinois, such as federally-exempt interest income. 
  • Subtractions are items that are taxed federally but are not taxed in Illinois, such as retirement and Social Security income and contributions to 529 college savings plans. This savings plan provision is one reason Illinois is considered one of the best states for college savers.

Illinois' Schedule M offers a full list of additions and subtractions recognized by the state. The list changes periodically, so check back each year. 

Itemized and standard deductions are not allowed in Illinois, which is consistent with the state's flat tax ideology of simplification and fairness. Taxpayers are allowed exemptions for dependents to reduce taxable income, however, and available tax credits can reduce the amount of tax owed. 

Illinois Income Tax Exemptions

The state allows you to take a deduction for each exemption you claimed on your federal tax return. You'll also receive an additional exemption if you or your spouse is age 65 or older, legally blind or both, and if your total household income is less than $65,000 as of 2017. Income thresholds can change periodically to keep pace with inflation. Your total exemption amount is then deducted from your base income to arrive at your net income, and the tax rate is applied to your net income.  

Illinois Tax Rate

All residents and non-residents who receive income in the state must pay the state income tax. If you work in Illinois and live in any other state except Wisconsin, Iowa, Kentucky and Michigan, you must pay income tax to Illinois on any income you earned there. Illinois has reciprocity with those four states so residents can cross state lines to work without worrying about paying income tax to their non-resident state.

The state tax rate is 4.95 percent effective July 1, 2017. 

Illinois Tax Credits

A credit is available for income taxes paid to another state if you live in Illinois but work in a state other than those with reciprocity. Other available credits include: 

  • The property tax credit: This credit is equal to 5 percent of Illinois property tax paid on your primary residence and you must own the residence. 
  • The education expense credit: If your dependent child or children attend kindergarten through 12th grade at a public or nonpublic Illinois school, you might qualify for a credit of up to $500 representing a portion of those expenses you paid. Your student must be under age 21, and both of you must have been Illinois residents at the time the expenses were paid. Divorced or separated parents who are not filing a joint tax return can't both claim a credit for the same expenses, but they can split them between their returns so they can both claim the credit for some portion of the expenses incurred. 
  • The earned income credit: The EIC is Illinois' only refundable tax credit. It's equal to 10 percent of the EIC amount received on your federal return.

Filing Your Return

Form IL-1040, the Illinois individual income tax return, is due annually on April 15.