State taxes: Illinois

Personal income tax

* The Taxpayer Accountability and Budget Stabilization Act, signed into law on Jan. 13, 2011, increases state income taxes on individuals and corporations and reinstated the Illinois estate tax. These changes are effective for the 2011 tax year.

* For the 2010 tax year, Illinois taxpayers calculate their state liability by muliplying their income by a flat rate, currently 3 percent.

* Many Illinois taxpayers may be able to electronically file their state returns by using IL-1040 Web File.

* Residents who cannot use the e-file system or who prefer paper forms can download them from Illinois Revenue.

Sales taxes

* Illinois's sales tax rate for general merchandise is 6.25 percent.

* A reduced rate of 1 percent applies to qualifying food, drug and medical appliances.

* Illinois allows several exemptions from tax. Publication 104, Common Sales Tax Exemptions, lists them. For a complete list of exempt transactions, see Illinois Administrative Code Section 130.120.

* Effective each January and July, the local government sales tax rates may be adjusted. The latest revised local rates can be found online using the Illinois Tax Finder.

* Form IL-1040 includes a line for reporting Illinois Use Tax.

Personal and real property taxes

These taxes are set by the local government agencies (city and/or county government).

Estate taxes

* Only real property (real estate) is taxed in Illinois. The revenue it produces is a major source of income for the state's taxing districts.

* The property tax is a local -- not state -- tax, imposed by local government taxing districts which include counties, townships, municipalities, school districts and special taxing districts.

* Generally, the property tax cycle is a two-year cycle. During the first year of the tax cycle, the property is assessed reflecting the property value as of Jan. 1 of that year. During the second year, the actual tax bills for the prior assessment year are calculated and payments collected from property owners (e.g., the tax for the 2010 assessment is paid in 2011).

* Most property in Illinois is assessed at 33.33 percent of its market value, except for farmland. Farmland is not assessed on its market value, but on its ability to produce income. Contact the tax assessor's office for exemptions and tax rates.

* Counties with a population of more than 200,000 may classify property for assessment purposes. Only Cook County uses this method; it has 13 classes of property with assessment levels from 16 percent of market value (residential property) to 38 percent of market value (commercial property).

* There are several homestead exemptions available for Illinois homeowners, including the following.

1. General Homestead Exemption.
2. Senior Citizens Assessment Freeze Homestead Exemption.
3. Senior Citizens Homestead Exemption.
4. Homestead Improvement Exemption.
5. Disabled Veterans' Exemption.

* In addition, the Senior Citizens Real Estate Tax Deferral Program allows persons 65 years of age and older, who have a total household income of less than $50,000 and meet certain other qualifications, to defer all or part of the real estate taxes and special assessments on their principal residences. The deferral is similar to a loan against the property's market value and a lien is filed on the property in order to ensure repayment of the deferral.

Inheritance and estate taxes

* There is no inheritance tax in Illinois.

* Until Jan. 1, 2010, the state imposed a limited estate tax related to previous federal estate tax collection.

* Effective Jan. 1, 2010, Illinois's estate tax was repealed. It was reinstated Jan. 1, 2011, with a $2 million exemption.