Illinois Tax Law Changes

Right now, the United States House of Representatives and Senate have two different versions of a new “Tax Cuts and Jobs Act”. Since the GOP controls both chambers of Congress it seems inevitable there will be a compromise and this new tax bill will be signed into law before the end of the year. Most of the provisions in the bill take place after 2017. As we all wait to find out which Federal tax changes will become law, now is a good time to review the two big changes to Illinois tax law.Both happened over the Summer and you may remember them from the news coverage.

On July 6, 2017, the Illinois House of Representatives joined the Senate in overriding Governor Bruce Rauner’s veto of Senate Bill 6. This provided Illinois a budget for Fiscal Year 2018, and ended the 793-day long budget crisis. The new budget increased the Illinois income tax rate from 3.75% to 4.95% effective July 1, 2017. As a result of a mid-year change, a weighted average of 4.35% will be used when preparing 2017 income tax returns. If your Illinois income tax withholding did not increase after July 1, 2017 you will want to make sure that is adjusted soon because the 4.95% will be the income tax rate for all of 2018.

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On August 28, 2017 Senate Bill 1947 was signed into law by Governor Rauner. Illinois lawmakers worked together on this bill to modernize the state’s education funding program and created a new five-year scholarship tax credit program. This new “Invest in Kids Act of 2017” goes into effect January 1, 2018,and willallow individuals and corporations to donate to scholarship granting organizations (SGO) and receive a 75% tax credit on their state tax return.Individual donors can direct their donations to the school or subset of schools of their choice, and there is a cap on the program of $75 million per year. Beginning on January 1, 2018, individual and corporate donors will be able to reserve tax credits by going on the website Tax credits are awarded on a first-come, first-served basis. Once approved, taxpayers are issued a Contribution Authorization Certificate (CAC) by the Illinois Department of Revenue. Within 60 days, you must provide a copy of the CAC, along with your full contribution to the SGO. Then within 30 days of receiving your contribution the SGO will issue you a Certificate of Receipt (COR). The SGOs will turn around and begin paying scholarships directly to the non-public schools on behalf of the qualifying students.

These new Illinois and upcoming Federal income tax changes can create new opportunities to reduce your income taxes. Now is a good time to discuss tax planning with your accountant. Please check back regularly for updates on the proposed Federal income tax changes.

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