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Personal income taxes

Taxable income

How is taxable personal income determined in your state?

The starting point for taxable personal income is an individual’s adjusted gross income for federal income tax purposes (35 ILCS 5/203(a)(1) (tax imposed on “adjusted gross income”); 5/203(e)(1)).

Tax residence

Under what circumstances is an individual deemed resident in your state for personal income tax purposes?

An individual is deemed an Illinois resident when he or she is in Illinois on anything other than a temporary or transitory purpose or is domiciled in Illinois but absent from the state for a temporary or transitory purpose (35 ILCS 5/1501(a)(20)(A); see 86 Ill. Admin. Code § 100.3020, the Department of Revenue’s regulation interpreting the meaning of “residency” for personal income tax purposes).

Rates

What are the applicable personal income tax rates?

For taxable years beginning on or after July 1, 2017, the personal income tax rate is 4.95% (35 ILCS Chapter 5/201(b)(5.4)).

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Illinois does not permit the standard or itemized deductions allowed for federal income tax purposes (see 86 Ill. Admin. Code § 100.2450(b)). Illinois does permit a number of deductions as set forth on Schedule M of an individual’s income tax return. Further, Illinois permits a personal exemption (35 ILCS 5/204(a)-(c)). Illinois allows additional exemptions for any taxpayer or spouse who is either 65 years of age or older, legally blind, or both (35 ILCS 5/204(d)). For tax years beginning on or after January 1, 2017, these exemptions cannot be claimed by taxpayers whose adjusted gross income for the taxable year exceeds $500,000 for returns with a federal filing status of married filing jointly, or $250,000 for all other returns (35 ILCS 5/204(g)).

Additionally, Illinois offers numerous personal and business-related tax credits against personal income tax, as set forth in Schedules 1299-C, 4255, CR, ICR, and IL-EIC attached to an individual’s return.

Filing requirements

What filing requirements and procedures apply?

In general, an annual return, Form IL-1040, must be filed by residents if they are liable for Illinois tax or if they must file a federal return, whether or not they are liable for Illinois tax. Non-residents must file if they are liable for Illinois tax (35 ILCS 5/502(a)). With respect to personal income tax, returns (without an extension) must be filed by the 15th day of the fourth month following the close of the taxpayer’s tax year (35 ILCS 5/505(a)(2)).

Employer obligations

What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (eg, withholding)?

Employers maintaining an office or transacting business in Illinois and required under the Internal Revenue Code to withhold tax on compensation paid in Illinois to individuals or certain payments to residents must deduct and withhold Illinois income tax in an amount equal to the amount by which the individual’s compensation exceeds the proportionate part of his or her withholding exemption attributable to the payroll period, multiplied by a percentage equal to the individual income tax rate (35 ILCS 5/701(a)). In general, such employers must also file Form IL-941 on a quarterly basis to report Illinois income tax withheld and pay the tax withheld to the state (electronically or with Form IL-501) either monthly or semi-weekly (see Ill. Dep’t of Revenue, Pub’l 131, Withholding Income Tax Payment & Filing Requirements (January 2018)).

For tax years ending on or after December 31, 2014, many partnerships, S corporations, and trusts must withhold an amount equal to a partner’s share of income apportionable to Illinois from each non-resident partner included on the respective entities’ Illinois income tax returns (see 35 ILCS 5/709.5(a); 86 Ill. Admin. Code § 100.7035(a)).

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