Income of individuals, companies, trusts and pass-through businesses is taxed by the state under the Illinois Income Tax Act (35 ILCS 5). The Illinois Department of Revenue (IDOR) enforces it. This page is for owners in Canada, India or another state who hold a business with Illinois activity.
Who the Illinois Income Tax Act covers
| Taxpayer | Income tax | Replacement tax | Return |
|---|---|---|---|
| Individual or sole proprietor | 4.95% | None | IL-1040 |
| Regular (C) corporation | 7% | 2.5% | IL-1120 |
| Subchapter S corporation | Shareholders pay | 1.5% | IL-1120-ST |
| Trust | 4.95% | 1.5% | IL-1041 |
| Partnership or LLC taxed as a partnership | Partners pay | 1.5% | IL-1065 |
| Tax-exempt organization | Unrelated business income only | Also applies to that income | IL-990-T |
What it means for a foreign-owned or cross-border business
| Situation | What the law says | What to check |
|---|---|---|
| Owner lives outside Illinois; the entity works here | An entity without the PTE election pays withholding for nonresident owners, with exceptions such as Form IL-1000-E from a non-individual owner | Which owners are individuals; whether PTE tax was elected |
| Owner sells shares or a partnership interest | Part of the gain is Illinois income if the entity is taxable here (tax years ending on or after 16 June 2025) | The entity's three-year Illinois factors |
| Company outside Illinois sells goods to Illinois customers | Federal law and the U.S. Constitution limit nexus; P.L. 86-272 shields only soliciting orders for goods filled from outside Illinois | What staff or agents do here beyond taking orders |
| Employee works briefly in Illinois | IDOR does not require withholding for a nonresident with under 31 days of Illinois service and pay not localized here | Day counts |
Mid-year movers: see our Illinois income tax guide and multistate nexus guide. LLC owned from abroad: see the foreign-owned LLC guide.
Page two has the rules, numbers and checklist: Illinois Income Tax Act rules and checklist. Related: Internal Revenue Code, Illinois sales and use tax, and the compliance calendar.
Official sources
- Illinois Department of Revenue: Income tax rates
- Illinois Department of Revenue: Partnership income tax information
- Illinois General Assembly: 35 ILCS 5/201 (imposition of tax)
- Illinois Department of Revenue: Publication 129, pass-through entity tax
- Illinois Administrative Code: 86 Ill. Adm. Code 100.9720, nexus
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.