Lawmakers said an eventual budget deal likely will include an income tax rate increase to 4.95 percent from the current 3.75 percent. How will that increase affect people in real-dollar terms?
Carmeda Gregory, a senior tax analyst with H&R Block in Sycamore, said Illinois income taxes are calculated using filers’ adjusted gross income from their federal tax returns as a starting point.
The state has a flat tax with limited deductions, which means that people pay roughly the same rate of tax regardless how much they earn. However, the state does not tax retirement income, including Social Security and public or private pension benefits. People older than 65 and those who are legally blind also receive a $1,000 deduction. Filers also receive a deduction for each dependent.
The amount changes based on the cost of living, Gregory said. These charts use the 2017 deduction, which is $2,175 a person. Homeowners also can subtract 5 percent of the property tax paid on their primary residence from their final state tax bill, Gregory said.
Here’s how an income tax rate increase from 3.75 percent to 4.95 percent would affect different people: