Illinois issues blended rates for tax years affected by income tax increase

The income tax increases recently enacted in Illinois took effect July 1, 2017, the middle of the taxable year for most taxpayers. The Illinois Department of Revenue published guidance for such taxpayers showing how to compute their tax for the year that includes July 1.

The flat individual tax rate increases from 3.5% to 4.5% resulting in a blended rate of about 4% for the 2017 calendar year filers, though the published guidance does not explicitly say so. Additional guidance will likely be provided in January 2018 for 2017 tax years, according to the state of Illinois. If they use the actual number of days before and after the rate increase in 2017, the rate would be 4.0041%.

For fiscal years beginning in 2016 for individuals, trusts and estates, Illinois provides a table:

The 1.5% “replacement tax” on top of the regular income tax for S corporations and fiduciaries is unchanged.

The corporate rate increases to 7%, from 5.25% resulting in a 6.125% rate for the 2017 calendar year C corporations, or 6.1322% using the actual number of days before and after the rate increase takes effect.

The blended rates for fiscal years beginning in 2016 are in the following table:

The 2.5% replacement tax that applies on top of these rates is unchanged.

Illinois also issued a Summary of Illinois Income Tax and Sales Tax Changes from P.A. 100-0022. The summary covers changes to the research credit, domestic production deduction, unitary taxation and other items affected by the changes. Watch for additional information related to these changes in future posts.

Contact your Eide Bailly professional or a member of our State and Local Tax Team to learn more.

Other coverage: Illinois increases income tax rates, restores research credit