Learn About Illinois State Taxes
Illinois cities have some of the highest taxes in the country. Chicago even charges a special tax on soda. The Illinois state income tax is a steep 4.95% flat rate. The state has a flat income tax system—which it tried to change to an increased progressive system in 2020—so it doesn't permit any tax deductions. Some credits are available, however.
Illinois Property Tax
Property taxes in Illinois were approximately twice the national average in 2020 for the third straight year, averaging $4,705 on a $205,000 home. Yet the state receives no revenue from property taxes—all this money goes to local municipalities. According to the Taxpayers' Federation of Illinois, 50% of the local property tax revenue went to school districts for education in the 2018-2019 school year.
There's a one-year lag in the property tax cycle. A property is assessed on January 1, and property tax is paid on that assessment in the following year. The property is assessed at 33.33% of its market value.
Property Tax Exemptions
Illinois has several exemptions that reduce your property tax by reducing the assessed value of your home. The General Homestead Exemption can be claimed for up to $6,000 for single-family homes that are the primary residence of the owner, and this increases to $10,000 in Cook County. A tenant with a legal interest in the property and an obligation to pay property taxes can also claim this exemption.
The Long-Time Occupant Homestead Exemption is available to Cook County residents who have lived in their home as their primary residence for 10 years or more, or five years if the home was purchased by the government or with non-profit assistance. Your income must be less than $100,000 a year to qualify for this exemption. The maximum exemption amount is $10,000.
There are also exemptions for senior citizens, a $2,000 exemption for the disabled, an absolute property tax exemption for disabled veterans, and an exemption for home improvements after a catastrophic event.
Besides exemptions, Illinois places a limit on how much property taxes can increase over the prior year. This is known as the Property Tax Extension Limitation Law or "tax caps”. This law limits the increase in total property taxes to 5% of the increase in the national Consumer Price Index, a measure of inflation, for the year preceding the tax year.
This limitation can be increased with voter approval if more revenue is needed by taxing districts.
Illinois Income Tax
Illinois income tax is levied at a flat 4.95% rate regardless of income level. Everyone pays the same percentage regardless of how much they earn. A constitutional amendment to implement a graduated income tax to replace this flat tax was defeated by voters in November 2020.
You can claim an exemption allowance of $2,275 per exemption that would have been claimed on your federal return if the Tax Cuts and Jobs Act hadn't eliminated this tax break beginning in 2018. You can also receive an additional $1,000 exemption if you or your spouse is 65 or older, legally blind, or both.
No standard or itemized deductions are allowed because of the state's flat tax system, but tax credits are available for taxes paid to another state, property taxes, and expenses paid for your child’s school. A refundable Earned Income Credit (EIC) is available for those who received the federal EIC credit. The total amount of the Illinois Earned Income Credit is 18% of the credit on your federal return.
Illinois income tax returns (Form IL-1040) are due annually on April 15.
Additional Illinois State Taxes
Some state taxes underwent a dramatic increase on July 1, 2019 as part of the "Rebuild Illinois" campaign to rebuild deteriorating infrastructure:
- The state sales tax rate is 6.25% as of 2020, but prescription and non-prescription drugs, medical equipment, and qualifying food purchases are taxed at only 1%.
- The gasoline tax is $0.387 per gallon through June 2021. Diesel is taxed at $0.581 per gallon.
- The cigarette tax is $2.98 per pack of 20. This increases to $8.17 per pack of 20 in Chicago. There's also a 15% tax on electronic cigarettes state-wide.
- Retailers pay a 3% tax on their gross soft drink sales in Chicago, which is usually passed on to the consumer when they purchase a soda or other drink containing less than 50% juice.
- Consumers in Cook County must pay 1 cent per ounce on sugary beverages. That means a 12-cent tax on a 12-ounce bottle.