2025 State tax changes taking effect January 1st
Illinois-Tax changes effective January 1, 202
Illinois is increasing its franchise (capital stocks) tax exemption to $10,000 on January 1, 2020. Notably, however, Illinois had once been on track to eliminate this tax altogether, a policy that has since been paused.
Illinois will also broaden its sales tax base to include retail leases of tangible personal property except motor vehicles, watercraft, aircraft, and semitrailers. The sales tax on purchases by retailers leasing tangible personal property, will be paid by the final lessee over the lease term, and not by the business when the TPP is acquired. This brings Illinois’ state tax structure in line with that of most other states when it comes to leasing TPP. This change will also ensure that sales tax is paid by the final consumer of the eligible products, moving Illinois’ sales tax closer to that of a well-structured consumption tax.
Additional changes to Illinois’ sales tax include changes made under SB 3362, enacted August 9, 2024. Under this new law, Illinois will transition to destination-based sourcing for retailers that are responsible for remitting sales taxes on retail sales of tangible personal property that occur outside of Illinois but that are made by a business with a physical presence in Illinois.
Further, to partially offset the costs to retailers of complying with sales tax collection and remittance laws, Illinois allows retailers to retain 1.75 percent of sales taxes collected. However, beginning January 1, Illinois will cap the retailers’ discount on sales due at $1,000 per month.
Finally, effective January 1, 2025, the General Assembly is commissioning a study of the state’s property tax system, with recommendations for improvement due July 1, 2026.
