The Illinois State Income Tax for Individual Taxpayers
The Illinois income tax system is much simpler than in other states
Illinois swims against the tide to some extent when it comes to state income taxes. As of 2019, it was one of only nine states that used a flat tax system rather than a progressive system, in which rates gradually increase as a taxpayer earns more. Not in Illinois. All taxpayers here pay the same rate regardless of income.
That could change in November 2020, however. The state plans to put the question to the voters on the 2020 ballot: Stay with the flat, single-rate tax system or join most other states by implementing a progressive system?
The flat tax rate and provisions discussed here are still applicable for the 2020 tax filing season when you file your 2019 return.
How to Calculate Your Illinois Income Tax
The starting point for your Illinois tax return is your federal adjusted gross income (AGI). You'll find your AGI on line 8b of your 2019 Federal Form 1040.
The IRS introduced a new federal Form 1040 for the 2018 tax year and did so again for the 2019 tax year. Form 1040A and Form 1040EZ are no longer available. These lines apply to the 2019 Form 1040.
Your AGI represents your income after adjustments are made to it, such as deductions for student loan interest you might have paid or IRA contributions you might have made. It's your gross or overall income less these deductions.
It doesn't take into account any itemized or standard deductions or tax credits that you might be also eligible for. These come later—they're all eventually subtracted from your AGI to arrive at your taxable income and whittle away at your tax bill to the IRS.
Your "Base Income"
Next, certain types of income are added back to your federal AGI on your Illinois return, and other types of income are subtracted. All this results in 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.
The state's Schedule M offers a full list of the additions and subtractions that are 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 system. Taxpayers are allowed to claim personal exemptions, however, and available tax credits can reduce the amount of tax owed.
The Illinois Income Tax Exemption
The state allows you to claim a personal exemption of $2,275 as of the 2019 tax year — the return you'll file in 2020. This amount is less than it was in previous years because legislation has removed the cost-of-living adjustment that increased it incrementally year by year.
The Illinois Tax Rate
The state's personal income tax rate is 4.95% as of the 2019 tax year. It was 3.75% prior to this time.
All residents and non-residents who receive income in the state must pay the state income tax. You must pay tax to Illinois on any income you earn there if you work there and live in any other state except Wisconsin, Iowa, Kentucky and Michigan. Illinois has reciprocity with these four states so residents can cross state lines to work without worrying about paying income tax to their non-resident state.
A credit is available for income taxes paid to another state if you live in Illinois but work in a state other than one of those with reciprocity.
The Illinois Property Tax Credit
Other available tax credits in the state include the property tax credit. It's equal to 5% of Illinois property tax paid on your primary residence. You must own the residence, and you can't claim this credit if your federal AGI exceeds $250,000, or $500,000 if you're married and file a joint return. Complete Schedule ICR with your Illinois tax return to claim it.
The Illinois Education Expense Credit
You might qualify for a credit of up to $750 representing a portion of the expenses you paid for your dependent child or children to attend kindergarten through 12th grade at a public or nonpublic Illinois school. Your student must be under age 21, and both of you must have been Illinois residents at the time the expenses were paid. This is up from $500 in tax years 2016 and earlier.
Divorced or separated parents who aren't filing a joint tax return can't both claim the credit for the same expenses, but they can split them between their returns. They can each claim the credit for a portion of the expenses incurred.
The credit is limited to single taxpayers with federal AGIs of $250,000, or $500,000 if you're married and filing jointly. You must file Schedule ICR to claim this credit as well.
The Earned Income Credit
The earned income credit (EIC) is Illinois' only refundable tax credit. It's equal to 18% of the EIC amount received on your federal tax return. Income limits and other rules apply, but you'll qualify if you're eligible for the federal EIC offered by the IRS.
You must complete and file Schedule IL-E/EIC with your state tax return to claim the credit. Enter the amount on line 8 of the Schedule on line 28 of your state tax return.
Filing Your Return
The 2019 return includes some minor changes designed to keep pace with the new 2019 federal Form 1040, but they're all notated. Just follow the accompanying instructions.
Tax Foundation. "State Individual Income Tax Rates and Brackets for 2019." Accessed Jan. 30, 2020.
Illinois Policy. "Illinois House Votes to Put Pritzker's Progressive Income Tax Amendment on 2020 Ballot." Accessed Jan. 30, 2020.
Illinois Department of Revenue. "2019 Form IL-1040 Instructions," Page 1. Accessed Jan. 30, 2020.
Illinois Revenue. "What If I Live or Work in a State That Has a Reciprocal Agreement with Illinois?" Accessed Jan. 30, 2020.
Illinois Revenue. "Property Tax Credit." Accessed Jan. 30, 2020.
Illinois Department of Revenue. "Publication 119 Education Expense Credit General Rules and Requirements for Home Schools," Page 2. Accessed Jan. 30, 2020.
Illinois Revenue. "Illinois Earned Income Tax Credit (EITC) and Earned Income Credit (EIC)." Accessed Jan. 30, 2020.
Illinois Department of Revenue. "What’s New for Illinois Income Taxes," Page 1. Accessed Jan. 30, 2020.