The tax landscape in Illinois is changing, and it’s up to business owners and individuals to stay on top of new requirements. Navigating these shifting sands can be challenging, and failure to properly file the necessary paperwork carries legal and financial implications.
A qualified business or estate attorney can help you understand how your holdings and accounts are impacted by these changes, and how you can minimize your exposure.
Clarity in a Complex Landscape
Small businesses in Illinois must stay abreast of changes in the state tax code. Missing a payment or a deduction can be painful, and can have lasting repercussions. The following changes affect individuals and businesses beginning in 2025:
- Changes to Illinois Sales Taxes. Many municipalities opted to increase sales taxes starting July 1, 2025. Retailers and food service businesses must break out the percentage of each sale that applies to state, local, and county taxes. Some are sales taxes while others are retailer’s occupation taxes (ROT). Payments are made to the state, which redistributes funds to local authorities. The state requires that payments are made on time, or penalties follow.
- Minimum Wage Increases. Starting January 1, 2025, wages for adults working hourly are $15 per hour and $16.25 per hour in Chicago; pay is set at $13 per hour for workers age 16 and above ($16.50 in Chicago), and workers receiving tips are paid $9 per hour ($12.62 per hour in Chicago).
- Gas taxes. Illinois has the second-highest gasoline tax in the country, and on July 1, 2025, it went up a little higher, by 3.3 cents per gallon. The gas tax increased to 48.3 cents per gallon, total.
- Lease Taxes. Starting July 1, 2025, taxes will be collected on lease payments of tangible personal property rather than just on sales. This can be complicated by local tax rules, requiring a company with multiple franchisees or clients in different locations to account for multiple tax streams.
- GILTI threshold raised. The Global Intangible Low Taxed Income (GILTI) dividends received deduction was reduced from 100 percent to 50 percent. This is income received from foreign holdings.
- Returning Citizens Wage Credit. This provides businesses who employ formerly incarcerated people with credit up to 15 percent of their wages.
- Franchise Tax Exemption. This tax was slated to disappear but will be reduced instead. The new exemption is $10,000 for qualifying businesses.
- Joyce vs. Finnegan Methods. This is a change in the method that multi-state businesses calculate their Illinois taxes. The state is switching to the “Finnegan” model, which calculates taxes based on all sales to Illinois customers by all of the companies in the group.
- Research and Development tax credit. Companies that are developing, designing, or improving products in specific categories may qualify for this credit. The calculation for this credit involves multiplying the qualifying expenditures by 6.5 percent.
- Tobacco and Wagering Taxes. Call them sin taxes, but the cost of using tobacco products jumped from 36 to 45 percent, and sports betting businesses will be dinged 25 cents for each bet accepted up to 20 million, then 50 cents per bet thereafter.
Untangling Tax Obligations and Credits in Illinois
How these changes affect you, your trust, or your business depends on how your tax entity is structured. A tax liability expert with years of experience in Illinois can explain ways of reducing your exposure and maximizing your deductions. A fresh set of eyes may be able to envision a streamlined approach to your accounts and accounting.Talk to a tax expert at Legacy & Life Law Firm LLC today to learn how you can benefit from their knowledge of Illinois tax law.