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Personal and Corporate Income Taxes
Personal Income Taxes
Income earned in Illinois or received by Illinois residents is taxed at 3.75%. Partnerships and S-corporations pay a 1.5% personal property replacement tax and S-corporations' owners pay the 3.75% personal income tax on their share of the corporation's income.
- There are no local personal income taxes in Illinois
- Retirement income is not taxed in Illinois
Corporate Income Taxes
Corporate income apportioned to Illinois is taxed at 7.0% which includes a 5.25% state income tax and a 2.5% personal property replacement tax (S-corporations pay 1.5%). A unitary group of corporations files a combined return in Illinois.
- The 2.5% replacement tax generates a credit equivalent to deducting the replacement tax before paying the regular corporate income tax.
- Income apportionment is based solely on in-state sales.
- Corporations with more than 80% of their payroll and property outside the U.S. are not included in combined returns. Corporations with unique apportionment formulas are not included in combined returns.
- Credits include a 0.5 percent credit for investment in mining, manufacturing or retailing, plus an additional 0.5% if employment increases over 1%; and an additional 0.5% investment tax credit plus a $500 jobs tax credit in Illinois Enterprise Zones. The Illinois EDGE program provides a credit equal to 3% of the wages of a new or expanding business' added employees.
- Dividends paid by corporations operating in Illinois Enterprise Zones and interest on loans to Enterprise Zones businesses are deductible.
- There are no local corporate income taxes in Illinois.