Illinois State & Local Income Tax Information
- Illinois uses a resident's adjusted gross income from his federal tax return as the basis for the state personal income tax, but allows residents to subtract from that amount any retirement income from Social Security or railroad retirement plans and retirement payments from private or government pension plans.
- There are other subtractions from personal income allowed, including active-duty military pay, income from U.S. Savings Bonds and other U.S. Treasury securities, income from any securities that are exempt from federal income taxes and contributions to Illinois prepaid college tuition plans or medical care savings accounts. Individuals also can subtract $2,000 for each personal exemption claimed on their federal tax return.
- Corporations pay a 4.8 percent state corporate income tax on income earned in or apportioned to Illinois. Corporations also pay a state income surtax in lieu of business personal property taxes. This surtax is 2.5 percent of income for large businesses and 1.5 percent for incorporated small businesses. Corporations can take a wide variety of income subtractions, depending on their individual circumstances.
- Illinois taxpayers can take certain tax credits that are subtracted dollar for dollar from their state income tax bills. Individuals can get personal income tax credits equal to 5 percent of their property tax bills, 25 percent of college tuition they paid, up to $250 in education expenses paid to a K-12 school for required study materials not provided by the school, and for income taxes paid to another state. Taxpayers who qualify for a federal Earned Income Credit also receive a state Earned Income Credit.
- Businesses can get tax credits of up to 1.5 percent for investments in mining, manufacturing or retailing. Other business tax credits reward investment in designated Illinois Enterprise Zones, and expanding employment.