Illinois Tax Exemptions: An Overview
Understand how to legally reduce your Illinois tax obligations. Our guide explains the criteria and steps for accessing various state and local exemptions.
A tax exemption is a legally sanctioned reduction in tax liability. In Illinois, exemptions are granted to specific individuals, organizations, or properties that satisfy defined criteria. The purpose is to lessen the financial burden on taxpayers in categories the state legislature has deemed worthy of relief. These provisions are established within state law and administered by state and local government agencies.
Available Property Tax Exemptions
Illinois provides several property tax exemptions to eligible homeowners, which reduce the Equalized Assessed Value (EAV) of their property before taxes are calculated. The General Homestead Exemption is available for residential property occupied by the owner as their principal dwelling. This exemption lowers the EAV by up to $6,000 in most counties, though some counties may offer a higher reduction. An initial application with proof of ownership and residency is required, after which the exemption is applied automatically in subsequent years.
The Senior Citizens Homestead Exemption is for homeowners aged 65 or older and provides a further reduction in the property’s EAV, separate from the General Homestead Exemption. This exemption can be as much as $8,000 in certain counties. To apply, homeowners must provide proof of age and file Form PTAX-324.
For seniors on a fixed income, the Senior Citizens Assessment Freeze Homestead Exemption offers protection against rising property values. To qualify, a homeowner must be 65 or older and have a total household income of $65,000 or less. This exemption freezes the EAV of the home at a base year value, preventing it from increasing due to inflation. The actual tax bill can still change if tax rates are adjusted. Applicants use Form PTAX-340 and must provide proof of household income.
The Homestead Exemption for Persons with Disabilities provides an annual $2,000 reduction in the EAV for a primary residence owned and occupied by a person with a qualifying disability. Applicants must submit Form PTAX-343 along with disability documentation, such as a letter from the Social Security Administration or a physician’s statement on Form PTAX-343-A.
The Standard Homestead Exemption for Veterans with Disabilities offers a reduction based on the percentage of their service-connected disability. Veterans must use Form PTAX-342 and provide a disability certification letter from the U.S. Department of Veterans Affairs. The EAV reduction is tiered based on the disability rating:
- A disability of 30% to 49% receives a $2,500 reduction.
- A disability of 50% to 69% provides a $5,000 reduction.
- A disability of 70% or more results in a full property tax exemption on the first $250,000 of the property’s EAV.
A property cannot receive both this exemption and the Homestead Exemption for Persons with Disabilities in the same year.
The Application Process for Property Tax Exemptions
The completed application package must be submitted to the Chief County Assessment Officer (CCAO) in the county where the property is located. Submission methods include mailing the application, delivering it in person, or filing electronically through an online portal if available. It is important to be aware of filing deadlines, which can vary by county and exemption type.
After the application is submitted, the CCAO’s office will review the information to verify eligibility. If the exemption is approved, it will appear as a reduction on the second installment of the property tax bill. This lowers the EAV of the property, which in turn reduces the overall tax liability.
Many exemptions, like the General Homestead Exemption, renew automatically each year as long as the homeowner continues to own and occupy the property as their principal residence. However, other exemptions require annual renewal. For instance, the Senior Citizens Assessment Freeze Homestead Exemption requires an annual verification form. The Homestead Exemption for Persons with Disabilities has traditionally required annual renewal, but some counties now automatically renew it for those with a permanent disability.
Other Major Illinois Tax Exemptions
Beyond property taxes, Illinois offers other tax exemptions. Qualifying organizations, such as those that are charitable, religious, educational, or governmental, can receive exemptions from paying sales tax. To use this benefit, an organization must apply to the Illinois Department of Revenue (IDOR) for an exemption identification number, or “E” number, to present to vendors.
On the income tax side, residents can reduce their taxable income with a personal exemption allowance on Form IL-1040. This exemption, adjusted annually for inflation, includes the taxpayer, spouse, and any dependents. However, this allowance is not permitted for taxpayers with a federal Adjusted Gross Income over $250,000 for single filers or $500,000 for those married filing jointly.
An additional $1,000 exemption is available for taxpayers who are 65 or older or legally blind. Furthermore, certain types of income are entirely exempt from state income tax, including all federally taxed Social Security benefits and income from most retirement plans like 401(k)s and IRAs.