Illinois Legislature Overrides Rauner Veto: Illinois Income Tax Changes Effective 7/1/17
On July 4, 2017, the Illinois Senate voted to override Governor Bruce Raunerâ€™s veto and passed a $36 billion budget package. With the override, the Illinois Senate effectively passed the package which amends the Illinois Income Tax Act and the Retailersâ€™ Occupation Tax Act, resulting in a $5 billion tax increase. Hereâ€™s what Illinois businesses need to know about the amendments and the tax hike.
Effective July 1, 2017, the income tax rate for individuals, trusts and estates, increases from 3.75% to 4.95%. For corporations, the increase is from 5.25% to 7%. Beginning immediately, payors who are required to withhold Illinois income taxes must adjust withholding tax rates. These new rates can be found on the Illinois Department of Revenueâ€™s website at www.â€Œreâ€Œvenuâ€Œe.stâ€Œaâ€Œâ€Œtâ€Œe.il.us.
Under the new budget plan, the Illinois Research and Development Credit has also been reinstated and is retroactive for the 2016 tax year (subject to some limitations) and Illinois Unitary business groups (consolidated returns) will no longer be able to exclude members classified as financial organizations, insurance companies or transportation companies.
Individual taxpayers with an adjusted gross income (AGI) that exceeds $500,000 for married filing jointly returns and $250,000 for all other individuals are no longer able to claim the following exemptions: personal exemption allowance; the K-12 Education Expense Credit; or the Illinois Property Tax Credit. The Domestic Production Activities Deduction, under the new amendments to the Illinois Income Tax Act, also must be added back to AGI for individuals or taxable income for all other taxpayers.
Should you have any questions regarding this new law, please contact us.