As of 2025, Illinois continues to use a flat income tax rate system, meaning every resident pays the same percentage illinois state income tax percentage of their taxable income, regardless of how much they earn. When filing an income tax return in Illinois, taxpayers begin with their federal taxable income. From there, certain items may be added back in, and others may be subtracted. Among the most important items that are taxable federally but not in Illinois are retirement and Social Security income, as well as distributions from a 529 college savings plan.

Principal Residence Exemption: Save on Taxes with Expert Tips

• In the case of the FSA and HSA, your money is there for you to spend on medical expenses.
• The two most popular tax software packages are H&R Block At Home, sold by the H&R Block tax preparation company, and TurboTax Federal & State, sold by the Intuit software company.
• This differs from states with progressive tax systems, where rates increase with earnings.
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• In the absence of allowances, filers are required to enter annual dollar amounts for things like income tax credits, non-wage income, itemized and other deductions and total annual taxable wages.

As reported by VisaVerge.com, the flat income tax rate in Illinois is both a strength and a weakness. It makes tax filing easier and more predictable, which is especially helpful for immigrants, new residents, and those with fluctuating incomes. However, the lack of tax brackets means the system is not progressive, so low-income residents pay the same rate as high earners. This can be seen as unfair by some, especially when combined with Illinois’s high property and sales taxes. For families, students, and workers considering a move to Illinois, the flat income tax rate offers simplicity but may not lower your overall tax burden due to other state taxes. It’s important to look at your complete financial picture, including property taxes, sales taxes, and any local taxes, when deciding where to live.

Illinois earned income tax credit (EITC)

• The personal exemption allowance further reduces taxable income and is set at $2,425 per taxpayer and dependent as of 2024 under the Illinois Income Tax Act (35 ILCS 5/204).
• Paper filing remains an option, requiring Form IL-1040 and any necessary schedules.
• Illinois allows personal exemptions but doesn’t offer a standard deduction.
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Taxable income in Illinois is calculated using the federal adjusted gross income (AGI) from the federal tax return, with state-specific adjustments to determine Illinois base income. Adjustments include additions like interest from https://zkus.mupyonline.cz/blog/2024/12/23/operating-expenses-explained-examples-accounting-2/ other states’ municipal bonds and subtractions such as federally taxed Social Security benefits and retirement income. The personal exemption allowance further reduces taxable income and is set at $2,425 per taxpayer and dependent as of 2024 under the Illinois Income Tax Act (35 ILCS 5/204).

Penalties for Non-Compliance

The late filing penalty is 2% of the tax due per month, up to 20%, while the late payment penalty starts at 2% for the first month, up to 15%. Interest on unpaid taxes accrues from the original due date, with a current rate of 3% per annum. Severe cases of intentional tax evasion may lead to criminal charges under Illinois law.

Once you’ve filed your tax return, all you have to do is wait for your refund to arrive. If you want to check the status of your Illinois tax refund, you can visit the Illinois Income Tax Refund page. If your state tax witholdings are greater then the amount of income tax you owe the state of Illinois, you will receive an income tax refund check from the government to make up the difference. The two most popular tax software packages are H&R Block At Home, sold by the H&R Block tax preparation company, and TurboTax Federal & State, sold by the Intuit software company. Both companies produce multiple editions for simple to very complex tax returns, so be sure to carefully compare the features offered by each package.

• Taxpayers unable to pay their full tax liability by the due date have options to avoid severe penalties.
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• Taxpayers can amend their tax returns if errors or omissions are discovered after filing.
• Taxpayers 65 or older and those who are legally blind receive an extra exemption of $1,000 each.
• Illinois collects a state income tax at a maximum marginal tax rate of %, spread across tax brackets.

As of July 2025, there have been no changes to the Illinois flat income tax rate or the lack of tax brackets. However, tax policy is always a topic of discussion in the state legislature. Some lawmakers and advocacy groups have called for a move to a progressive tax system, which would introduce tax brackets and higher rates for higher earners. Qualifications include being 65 and older and having a household income of no more than $65,000.Contact your county assessor for information about exemptions and your county treasurer for information about deferrals. These plans are designed to encourage long-term savings by providing tax advantages. Contributions made to these plans are typically pre-tax, meaning they are deducted from the employee’s gross income before taxes are calculated.

Federal Income Tax Tables in 2025

For the 2025 tax year, there have been no changes to the Illinois state income tax structure. The flat income tax rate remains at 4.95%, and there are still no tax brackets. This means that, unlike the federal tax system or the systems in many other states, Illinois does not adjust the tax rate based on income levels. Some taxpayers should file even if their income is below the exemption threshold.

Illinois Income Tax Estimator

Rental income from Illinois properties is taxable, even if the owner lives elsewhere. You can use the income tax estimator to the left to calculate your approximate Illinois and Federal income tax based on the most recent tax brackets. If you have a lot of income that comes from non-work sources, like investments, the amount your employer withholds from your paychecks might not be enough to avoid ending up with a big tax bill.

The Earned Income Tax Credit is currently 20% of the federal credit by the same name. For tax year 2024, the maximum state credit a person can claim is https://www.bookstime.com/articles/trade-payables $1,566. The Education Expense Credit provides a credit to parents who spent over $250 on eligible K-12 education expenses.