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Illinois Income Tax Rates and Dates for Business Planning
Illinois taxes individuals, corporations, trusts and estates under 35 ILCS 5, the Illinois Income Tax Act, which also adds a replacement tax on corporations, partnerships and trusts. The Illinois Department of Revenue runs it. For owners planning year-round, it adds a second layer to entity choice. Our checklist is the Prairie-Wren Return Ladder, below. The official text is at ilga.gov.
The short version
- In 2026 individuals pay a flat 4.95 percent, with no brackets.
- A C corporation pays 7 percent plus a 2.5 percent replacement tax. For S corporations and partnerships the replacement tax is generally 1.5 percent; owners of these entities pay income tax on their own shares.
- Partnerships and S corporations may elect to pay 4.95 percent themselves, with a matching owner credit.
Who it covers
| Taxpayer | Return | Note |
|---|---|---|
| Individual, sole proprietor | IL-1040 | Business income flows through federal income |
| C corporation | IL-1120 | Taxed at the entity |
| S corporation | IL-1120-ST | Owners pay on their shares |
| Partnership, multi-member LLC | IL-1065 | Partners pay on their shares |
The numbers
| Item | Amount | Year |
|---|---|---|
| Personal exemption allowance | $2,925, none above $250,000 of federal AGI ($500,000 joint) | 2026 |
| Estimated tax trigger | $1,000 for individuals; $400 for C corporations; $500 for electing entities | 2026 |
| Tax paid late | 2% in the first 30 days, 10% after, 15% if an audit has begun | Current |
| Interest | 7% simple | Jan. 1, 2025 to Dec. 31, 2026 |
Source: 35 ILCS 5/201 and Illinois Department of Revenue
For taxable years 2026 and thereafter, Illinois's bonus depreciation add-back covers Sections 168(k) and 168(n).
The Prairie-Wren Return Ladder
- Register with the Department (Form REG-1) before hiring or selling.
- Match the return to the entity.
- Test the estimated-tax triggers, then pay in timely installments.
- Set the withholding schedule and the quarterly Form IL-941.
- Treat an extension as time to file, not to pay.
What it means for year-round planners
- Pass-through owners pay 4.95 percent personally plus the entity's 1.5 percent; a C corporation pays 9.5 percent before shareholder tax. See choosing a business structure.
- The pass-through election is made yearly and is irrevocable after the extended due date.
- Add these dates to the compliance calendar.
Mistakes people make
- Treating an automatic extension as more time to pay.
- Sending a second return with amended figures rather than the proper amended form, for example IL-1065-X.
- Believing S corporations and partnerships pay no Illinois tax; they pay 1.5 percent replacement tax.
A notice that states protest rights (60 days to respond), a Tax Tribunal petition or a fraud question is worth taking to an attorney.
Common questions
Is the Illinois income tax progressive?
No. The rate for individuals is a flat 4.95 percent.
Does the pass-through entity tax have an end date?
Illinois law no longer sets one of its own, since P.A. 104-453 took effect December 12, 2025. But 35 ILCS 5/201(p)(10) applies the election only to years in which the federal state-and-local deduction limit applies.
Does hiring a remote employee start Illinois withholding on day one?
Not always. For a nonresident whose pay is not localized here and who has fewer than 31 days of Illinois service, the Department does not require withholding.