NEWS UPDATE from Mathieson, Moyski, Austin & Co., LLP

Illinois Passes Budget – Changes to Tax Rates and Rules to Begin Immediately
On June 7, 2017, the Illinois State Legislature finally passed a budget which includes several changes to Illinois tax law. We wanted you to have this information right away for your own tax planning. The following is a summary of the most relevant changes:
Tax Rates  

Effective July 1, 2017, income tax rates increase as follows:
  • For individuals, trusts and estates, the Illinois Income Tax is increasing from 3.75% to 4.95%.
  • For corporations (excluding S Corporations), the Illinois Income Tax is increasing from 5.25% to 7%.
Additional Changes
The new law made changes to several deductions and credits:

  • Standard Exemption Allowance – For tax years beginning on or after January 1, 2017, the personal exemption allowance may not be claimed by taxpayers with adjusted gross income for the taxable year in excess of $500,000 for returns with a federal filing status of married filing jointly, or $250,000 for all other returns.

  • K-12 Education Expense Credit – For tax years ending on or after December 31, 2017, the maximum amount of the K-12 Education Expense Credit has been increased to $750 per family. However, the credit is not allowed if the taxpayer’s adjusted gross income for the taxable year exceeds $500,000 for returns with a federal filing status of married filing jointly, or $250,000 for all other returns.

  • Illinois Property Tax Credit – For tax years beginning on or after January 1, 2017, the Illinois Property Tax Credit is not allowed if the taxpayer’s adjusted gross income for the taxable year exceeds $500,000 for returns with a federal filing status of married filing jointly, or $250,000 for all other returns.

  • Instructional Materials and Supplies Credit (New) – For tax years beginning on or after January 1, 2017, a credit up to $250 is allowed for amounts paid for instructional materials and supplies with respect to classroom-based instruction by teachers, instructors, counselors, principals, or aides who work in a qualified school for at least 900 hours during a school year. The credit may not be carried back and is non-refundable, but any excess credit may be carried forward for five years.

  • Domestic Production Activities Deduction – For tax years ending on or after December 31, 2017, the Domestic Production Activities Deduction must be added back to adjusted gross income (for individuals) or taxable income (for all other taxpayers).

  • Research and Development Credit – The Research and Development Credit has been reinstated and is retroactive for the 2016 tax year. The Illinois Department of Revenue will provide updated forms and instructions in order to claim any credit that was not previously allowed.
2017 Estimated Payments
Estimated payments on income received after July 1, 2017, will need to be calculated and paid at the new higher rates.  If your estimates have been based on a projection of 2017 income, those estimates may need to be increased for the 3rd and 4th quarters.
For those paying estimates based on their 2016 income tax liability, it is currently unclear whether the safe harbor exception will apply to 2017. We will keep you updated as we learn more. Additional guidance should be available prior to the September 15 due date for 3rd quarter estimates.

Partnerships, S Corporations and Trusts

Pass-through withholding payments required to be made on behalf of nonresident members must be calculated incorporating the new rates.

As with any changes that affect you and your family or business, we are here to be of service and guide you through those changes. Please call our office at 630-653-1616 or email us at info@mmaadvisors.com if you have questions or would like to discuss the implications of these tax law changes to you and your financial situation.