The Law surrounding Chicago Income Tax is complex and every effort has been made to offer information that is current, correct and clearly expressed. The information in this summary is intended to be no more than a general overview of the position and certain details have been deliberately omitted. The contents of this page should not be taken as an authoritative statement of Income Tax of Illinois. Neither the author nor the publisher are responsible for the results of actions taken on the basis of information contained in this summary, nor for any errors or omissions. This text is not intended to render legal, accounting or tax advice. Readers are encouraged to seek professional advice concerning specific matters before making any decision.
Illinois Income Tax Rates
Chicago follows the tax structure of Illinois. Illinois tax structure is very straight forward, easy to calculate and one of the lowest in the country. Illinois charges every individual or corporation a flat income tax of 5%, making it very easy to calculate. Some good news is that the 5% income tax will be in place only till 2015 after which the income tax is set to fall to 3.75%.
Illinois Tax Base
Your Illinois taxable income includes the adjusted gross income (AGI) amount figured on your federal return, plus additional income that must be added to your AGI. Part of your income may be subtracted when calculating your Illinois base income. There are also add backs to this AGI such as such as federally exempt interest income. For items that are taxed federally but not taxed in Illinois are subtracted from the AGI, examples of such are retirement and Social Security income, and contributions to any college savings plan. Most of these complications will not apply to expats. For the full list of substructions, you can view them here.
The base income earned in Illinois is then reduced by the number of federally claimed exemptions and any additional exemptions. These exemption can include such as student loan interest, IRA contributions, and moving expenses, but before itemized or standard deductions.
The amount of each federally claimed exemption is $2,000, and the additional exemptions are $1,000 each for any taxpayer or spouse who was either 65 years of age or older, legally blind, or both.
The base income deducts the total exemption amount to arrive at “net income.” The taxation then finally occurs against this net income.
Illinois Tax Credits
There are tax Credits for Illinois which can get you rebates, such as property tax credit, K-12 expenses and Earned Income Credit (the only refundable credit in Illinois).
For more information, do check out the tax section on Illinois’s website.