In June 2019, the Illinois legislature passed a Public Act which will create a progressive income tax if approved by Illinois residents on the November 2020 ballot. If approved, the progressive income tax would take effect January 1, 2021. The Illinois Constitution currently treats all taxpayers the same with a flat tax rate.
The potential new marginal tax rates will likely result in lower income taxes for those filers who have net income of less than $250,000, while those filers who have net income over $250,000 may have higher tax rates applied to them.
New tax rates have been passed and are set to take effect should the amendment pass. Those rates are:
Single Filers- the first $10,000 of taxable income would be taxed at 4.75%; between $10,000 to $100,000 at 4.9%; $100,000 to $250,000 at 4.95%; $250,000 to $350,000 at 7.75%; $350,000 to $750,000 at 7.85%; and if taxable income exceeds $750,000 all taxable income is taxed at 7.99%.
Joint Filers– the brackets are the same as single filers up to $250,000. Taxable income from $250,000 to $500,000 would be taxed at 7.75%; $500,000 to $1,000,000 at 7.85%; and if taxable income exceeds $1,000,000 all taxable income is taxed at 7.99%.
Corporations– All corporations, except those with S-Corp status, will be taxed at 7.99%.
The tax law set to take effect leaves in place the exclusion of retirement income, meaning Social Security, pension and retirement account income remains untaxed. A $100 child tax credit, which begins to phase out at $40,000 for single filers and at $60,000 for joint filers is also created. All other deductions or credits remain available under the current law.