Illinois Small Business Tax Guide — 2026

Illinois Income Tax

Illinois imposes a state income tax with rates of 4.95% flat rate. Self-employed individuals, freelancers, and sole proprietors pay this tax on their net business income in addition to federal income tax and federal self-employment tax (15.3%).

Self-Employment in Illinois

Illinois imposes a flat 4.95% income tax. Self-employed individuals also pay the Replacement Tax if operating as a partnership or S-Corp (1.5%). No separate SE tax for sole proprietors.

Estimated Tax Requirements

Quarterly estimated payments required if you expect to owe $1,000 or more. Standard federal due dates apply.

IllinoisDeductions & Credits

• Illinois starts with federal AGI — most federal deductions flow through
• No standard deduction or personal exemption at state level
• Property tax credit: 5% of property taxes paid
• Education expense credit for qualifying expenses

Business Filing Fees

LLC: $150 formation + $75 annual report. Corporation: $150 formation + $75 annual report.

Key Facts About Illinois Taxes

• Illinois has a constitutionally mandated flat income tax — rate cannot be progressive without amendment
• Replacement Tax of 1.5% applies to S-Corps and partnerships
• Chicago area has some of the highest combined sales tax rates in the nation
• No deduction for retirement income — Illinois exempts it entirely

Track Your Illinois Business Expenses

TaxTidy helps Illinois freelancers and self-employed individuals track every business expense with AI-powered receipt scanning. Snap a photo of any receipt and TaxTidy instantly extracts the vendor, amount, and tax category — then maps it to the correct IRS Schedule C line. At tax time, generate an audit-ready PDF report with all your deductions organized and totaled.

Frequently Asked Questions

Official source: Illinois Department of Revenue