Illinois Income Tax In Focus

IL TaxBack in 2011, Illinois raised its personal income tax rate a whopping 66%, increasing the long held 3% state tax rate to 5%. This tax increase has hit many small and medium size businesses, as the majority of these businesses are “flow-through” entities where all business income is taxed to the individual owners at the individual income tax rates.

Fast forward to 2014, and the pending phase out or expiration of the tax increase is just around the corner, scheduled to take effect in 2015. In 2015, the 5% rate is scheduled to decrease to 3.75%. That is, if the legislature does not get their hands on a bill to terminate the expiration.

Also proposed is the movement to a graduated income tax system, similar to the Federal government’s system in which income is taxed at increasing rates as income increases.

Curious how this all affects corporate taxpayers in Illinois? Back in 2011, the previous 4.8% Illinois income tax rate for corporations also increased by 45% to 7%. The previous increase to 7% is scheduled to be rolled back to 5.25% in 2015 along with the personal income tax rate decrease. In addition to all of these rates, Illinois levies a replacement tax of 2.5% on corporate income, which is set to remain regardless of what happens with the income tax rates.

None of the current legislation has managed to pick up enough steam to make its way toward a signed bill, but we are continuously monitoring legislative developments as they occur. For more information on this issue, please contact Ryan Giolitto at 630-285-0215 ext. 8214.

 

Ryan Giolitto

Ryan Giolitto is a business consultant and advisor helping businesses and individuals focus on growing their business and wealth to fund a successful retirement strategy. Ryan is Manager of U.S. Tax and Financial Consulting Services at CDH, P.C. where he specializes in tax and financial planning for businesses and high net worth individuals. Ryan graduated from the University of Illinois in Champaign with a B.S. degree in Accounting and a M.S. degree in Taxation. Ryan is a licensed Certified Public Accountant (CPA) in the state of Illinois and a Certified Financial Planner (CFP®). http://www.cdhcpa.com
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