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Illinois Budget Update – July 6th, 2017

On July 6, 2017, the Illinois General Assembly passed Public Act 100-0022, overriding the Governor’s veto. This bill is more commonly known as the Illinois Budget. In this Act, there are numerous tax changes that will affect all Illinois residents, many retroactive to July 1, 2017. If you are concerned about how these tax changes impact your personal tax situation or want further clarification, then please contact us at 847-695-2700. Below are the most applicable highlights that could impact you.
Individuals & Trusts:

• Individual, Trust & Estate income tax rates increase from 3.75% to 4.95%, effective July 1, 2017
• The credit for education expenses increases to $500, from $250, for tax years ending prior to December 31, 2017, and increases to $750 for tax years ending on or after December 31, 2017
• Illinois will disallow a deduction for Section 199 (Domestic Production Activities Deduction) for taxable years ending on or after December 31, 2017
• New exemption and credit phase outs – If the taxpayer’s AGI exceeds $500,000 per married couple or $250,000 for all other taxpayers, then the Personal Exemption and the Property Tax Credit will be phased out
• Change to the Earned Income Credit – For taxable years beginning on or after January 1, 2017, the credit will increase to 14% of the federal credit and increase to 18% for years beginning

on or after January 1, 2018

• Creates a new non-refundable credit of up to $250 for instructional materials and supplies paid for by school teachers, and any unused credit can be carried forward five years

Corporations, S Corporations & Partnerships/LLC:

• The Corporate income tax rates increase from 5.25% to 7%, effective July 1, 2017
• Replacement taxes for Corporations of 2.5% and 1.5% for S Corporations, Partnerships and Trusts are unchanged
• The Research & Development Credit has now been extended to tax years ending prior to January 1, 2022, however, there are new income limits that could limit the use of the credit
• Clarifications to the methods available for allocating income & exemptions between two short periods for income tax purposes
• Illinois will disallow a deduction for Section 199 (Domestic Production Activities Deduction) for taxable years ending on or after December 31, 2017
• Graphic Arts machinery & equipment is included under the machinery and equipment exemption for sales tax beginning July 1, 2017
• Creation of a new State Tax Lien Registry