Illinois
Taxes
Illinois
Corporate Tax
According to the Illinois Tax
Code, every corporation receiving income in Illinois
is subject to tax on net income. The tax rate is 7.3%,
4.8% of which is the income tax and 2.5% of which
is the property replacement tax (there is no tax on
personal property in Illinois). The statute can be
found here.
Illinois corporations are also
subject to a franchise tax. The tax is based on the
share of a corporation’s paid-in capital in
the state of Illinois. The initial franchise tax is
imposed at the beginning of the corporation’s
first year doing business in the state. The initial
franchise tax rate is 0.15% of the share of paid-in
capital in Illinois. The franchise tax must be no
less than $25.00 and no more than $2 million. After
a corporation’s first year, the franchise tax
is due annually at a rate of .10%, again with a minimum
of $25.00 and a maximum of $2 million.
Illinois
State Income Tax
The Illinois Income Tax is imposed
on every individual, corporation, trust, and estate
earning or receiving income in Illinois. The tax is
calculated by multiplying net income by a flat rate.
The Illinois Income Tax is based, to a large extent,
on the federal Internal Revenue Code (IRC).
Tax Rate
The rate is 3% of net income,
which is the lowest rate among states which assess
an income tax according to The Tax Foundation.
Tax Base
The starting point for the Illinois
Individual Income Tax is federal adjusted gross income.
Federal adjusted gross income is “income”
minus various deductions (not including itemized deductions,
the standard deduction, or any exemptions). Next,
the federal adjusted gross income is changed by adding
back certain items ( e.g., federally tax-exempt interest
income) and subtracting others ( e.g., federally taxed
retirement and Social Security income). The result
is “base income.”
The base income earned in Illinois
or while a resident of Illinois is then reduced by
the number of federally claimed exemptions plus any
additional exemptions. The amount of each exemption
is $2,000.
Additional exemptions are provided
for any taxpayer or spouse who was either 65 years
of age or older, legally blind, or both ($1,000 each).
The total exemption amount is deducted from base income
to arrive at “net income.” The tax rate
is then applied against net income.
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