From the Desk of Michael T. McCormick
The New Illinois Tax Hike
Illinois budget legislation has been enacted over Gov. Bruce Rauner’s veto that increases corporate and personal income tax rates, creates an income and personal property replacement tax addback for the federal domestic production activities deduction under IRC §199, expands the definition of “unitary business group,” extends the sunset date for the research and development income tax credit, increases the education expense and earned income tax credits, eliminates the educational expense credit, the property tax credit, and personal income tax exemptions for certain taxpayers, and establishes a new income tax credit for teachers, instructors, counselors, principals, or aides who purchase school instructional materials and supplies. For most clients the question is how much more am I going to pay in Illinois tax?
Income Tax Rates
Effective for taxable years beginning on or after July 1, 2017, the corporate income tax rate is increased from 5.25% to 7% and the personal income tax rate is increased from 3.75% to 4.95%. If you want to calculate how much that will effective your specific tax bill, the Chicago Tribune has an excellent calculator that can do the math for you.
Personal Income Credit and Exemption Limits
Effective for taxable years beginning on or after January 1, 2017, taxpayers who have adjusted gross income for the taxable year exceeding $500,000 for taxpayers filing a joint federal return or $250,000 for all other taxpayers may not claim:
• the education expense credit;
• the 5% credit for property taxes paid on residential real property; or
• personal income tax exemptions.
The standard personal exemption is $2,050, plus an annual cost-of-living inflation adjustment based on the Consumer Price Index. An additional $1,000 exemption is allowed for each taxpayer who is 65 or older and for each taxpayer who is blind.