Illinois PTE Tax 2024 - 2025

The Illinois Pass-Through Entity (PTE) Tax is a relatively new development aimed at addressing the federal cap on state and local tax (SALT) deductions. This guide provides a detailed overview of the Illinois PTE Tax.

Illinois PTE Tax

The Illinois PTE Tax is designed to allow pass-through entities, such as partnerships and S corporations, to elect to pay state income tax at the entity level. This election can help partners and shareholders circumvent the $10,000 SALT deduction cap imposed by the federal Tax Cuts and Jobs Act (TCJA).

The Illinois PTE Tax applies to the following entities:

  • Partnerships: Includes general partnerships, limited partnerships, and limited liability partnerships.
  • S Corporations: Entities that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.
  • Limited Liability Companies (LLCs): Treated as partnerships or S corporations for tax purposes.

Eligibility Requirements:

  • The entity must be a partnership or S corporation.
  • The election must be made on an annual basis by the entity.

How to File Illinois PTE Tax?

Filing the Illinois PTE Tax involves several steps:

  1. The entity must make an election to pay the tax on or before the due date for filing its original return (including extensions) for the taxable year. This election is made by filing Form IL-1065 (for partnerships) or Form IL-1120-ST (for S corporations) and checking the appropriate box indicating the election.
  2. The PTE tax is calculated based on the entity’s net income as if it were subject to Illinois income tax. The current Illinois PTE Tax rate is 4.95%.
  3. File the appropriate tax return, either Form IL-1065 or Form IL-1120-ST, with the Illinois Department of Revenue. Ensure that all required schedules and forms are included.
  4. Payment of the PTE tax must accompany the return. Payments can be made electronically via the Illinois Department of Revenue’s MyTax Illinois portal.
Illinois PTE Tax Exemptions

Illinois PTE Tax Exemptions

There are certain situations where the Illinois PTE Tax may not apply or where an entity might be exempt:

  • Non-Electing Entities: Entities that do not make the election to pay the PTE tax will not be subject to it.
  • Passive Income: Entities with only passive income may not find the PTE election beneficial.
  • Income Not Subject to Illinois Tax: If the entity’s income is not subject to Illinois tax, the PTE election may not apply.

Due Dates for Illinois PTE Tax

Adhering to the due dates for filing and payment is crucial to avoid penalties and interest. The key due dates are:

  • Election and Filing Due Date: The election to pay the PTE tax must be made by the due date of the entity’s original return, including extensions. Typically, this is the 15th day of the 4th month following the close of the taxable year (April 15 for calendar year filers).
  • Quarterly Estimated Payments: If the entity is required to make estimated tax payments, these are due quarterly on the 15th of April, June, September, and January of the following year.
  • Final Payment: The final payment of the PTE tax is due with the filing of the annual return.