What are the Income Tax Laws in the State of Illinois?
Income tax is not something that you like to pay. There is always talk about the states and countries that do not have the income tax and wonder why Illinois can't do away with tax too. However, as this is an unavoidable expense you need to ensure that you are well versed with the laws itself. Here is a summary of the Illinois personal income laws.
Income Tax Laws in Illinois
Most states in the United States levy a pretty heavy personal income tax on the residents along with the additional federal income taxes. This personal income tax requires that individuals, trusts, and estates within the state of Illinois have to pay a 5 percent tax on all taxable net income. A few corporations, partnerships, and trusts may also need to pay an additional amount of tax on their income.
Individuals, trusts, and estates need to file taxes. However, partnerships are non-taxable. The amount of tax imposed on all taxpayers is 5% of their taxable net income. There is an additional personal property replacement tax that amounts to 2.5% of the net income imposed on trusts, S corporations, and trusts. Beginning in 2015 everyone who earned more than $1 million in taxable income need to pay an additional 3 percent on that income.
The Illinois state taxes coexist with the already applied federal tax laws. You will find that under the basic tax laws both the federal and state governments are allowed to tax both kinds of income earned and unearned. Earned income consists of wages, salaries, commissions, bonuses, tips, sick pay, and even unemployment benefits. On the other hand unearned income consists of interest, business and farm income, rental income, dividends, royalties, alimony, winnings from gambling, and profits from asset sales.
All federal taxes are handled by the IRS that is the Internal Revenue Service and have to be paid according to the internal revenue code (IRC). There are some IRS forms and publications available online that give detailed information about these taxes.
There are many state income codes that are usually similar to the federal code the only significant distinction being that most of the states offer taxpayer assistance programs for anyone who needs help while filing the state as well as federal income tax returns, most states also make their state tax forms readily available online.
If you are an:
Illinois resident: you need to file a Form IL-1040 if you need to file income tax returns however you are not needed to file income tax returns if the individuals base income from the line 9 is higher than the Illinois exemption allowance.
Illinois that worked in Iowa Kentucky, Wisconsin, Michigan: also need to file the Form IL-1040 and include all income as well as any compensation that you receive from an employer who is out of state.
Retired Illinois resident: need to fill the same form however a few retirement incomes such as social security, pension, governmental deferred compensation, and railroad retirement can be subtracted from the state income.
A part-time resident: has to file the form IL-1040 as well as the Schedule NR in the cases where you have earned income from any source while you were in residence, earned income from a source in Illinois while not in residence, or want a refund of any withheld Illinois income tax.
A student: you are not exempt from tax nor do you have any special residency provisions. However, some types of income such as fellowships and scholarships are not taxable in Illinois.
A surviving spouse or representative of a recently deceased taxpayer: you need to file returns of that taxpayer.