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Tax Law Changes Included in New Illinois Legislation

July 18, 2017
On July 6, 2017, for the first time in over two years, Illinois passed its budget bill, which includes multiple tax law changes affecting both individuals and businesses.

Tax Rate Increase

Illinois taxpayers will be seeing higher tax bills going forward. The tax rate for individuals, trusts, and estates increased from 3.75% to 4.95%, and the corporate income tax rate increased from 5.25% to 7%. Both increased rates are effective July 1, 2017.

Research and Development Credit

The Illinois research and development credit, which allows a credit in the amount of 6.5% of qualifying expenditures for increasing research activities in Illinois, expired on January 1, 2016. The bill has extended this credit through January 1, 2022, and includes the period of time from January 1, 2016 until the date the budget bill passed.

Domestic Production Activities Deduction

For taxable years ending on or after December 31, 2017, the federal deduction for domestic production activities (DPAD) will no longer be deductible for Illinois purposes, and will be an adjustment on the individual or corporate tax return.

Education Credits

Qualifying teachers, instructors, counselors, principals, or aides in an Illinois public or private school can take a maximum $250 credit for the cost of instructional materials and supplies purchased for their classroom for tax years beginning on and after January 1, 2017.

Parents of a full-time student in kindergarten through twelfth grade attending a public or nonpublic school in Illinois can take a maximum credit of $750 for qualifying education expenses (tuition, book fees, lab fees) paid in excess of $250. Up until December 31, 2017, the maximum credit is $500.

Please note that some of the tax law changes are already in effect. If you have Illinois based income, and were planning to pay estimates on that income, your estimate amounts should be reviewed. If you have any questions regarding these provisions or other changes from the Illinois budget bill, please contact your SVA professional.