Illinoisans can claim a bigger state tax credit next year under the new budget

A tax credit used by millions of Illinois residents that lawmakers quietly pared back last year is getting more generous in the new state budget approved by the legislature and awaiting Gov. J.B. Pritzker’s signature.

It’s called the standard exemption, and until this tax year, it had been getting larger every year since 2011 to match increases in inflation under an initiative first enacted by former Democratic Gov. Pat Quinn.

WBEZ reported earlier this year that lawmakers quietly detached the credit from inflation after one of the biggest jumps in the consumer price index in decades, driven by supply-chain issues linked to the COVID-19 pandemic.

The 2025 spending plan the Illinois House gave final legislative approval to last week includes funding for once again tying the standard exemption to inflation, meaning the exemption individuals can claim for tax year 2024 will grow from $2,425 to $2,775.

That translates to tax savings for a family of four of more than $69, according to WBEZ calculations.

The cost of doing that is estimated to be $172 million, almost double the cost of a more modest increase in the standard exemption Pritzker proposed in his 2025 budget plan in February. The governor had asked lawmakers to increase the exemption to $2,550 for the 2024 tax year, which would have cost $93 million, but lawmakers didn’t opt for that plan.

A top aide said the governor favors a bigger boost to the tax credit.

“The budget is balanced, and there were other revenue proposals the General Assembly included in the final budget, along with a revenue revision upward that occurred after he proposed his budget in February,” Pritzker spokeswoman Jordan Abudayyeh said.

Since 2011, under a tax law change championed by Quinn, the standard exemption increased with inflation, from a $2,000 deduction in 2011 to $2,425 in 2022.

Had the deduction been allowed to stay in step with actual inflation, the 2023 standard deduction amount would have been $2,625. That total would have reflected the 8% increase in the consumer price index during 2022, the highest inflationary jump since 1981.

When Pritzker and Democrats instead decided last year to keep the $2,425 amount in effect for the 2023 tax year, it allowed $114 million to be diverted elsewhere in the budget. Under last year’s law, the inflation escalator was to resume for the 2024 tax year and continue through the 2028 tax year.

Earlier this year, it was Quinn who first raised alarm bells that the standard exemption had been frozen after being tucked into the state budget last May largely unnoticed.

“I’m very glad for all the taxpayers of Illinois,” Quinn said. “Eleven million benefit every year from the personal exemption amount, which is a tax-relief measure for everyday families that’s protected and indexed to inflation and the cost of living. Everybody knows we’ve had a tough time with inflation over the last few years.

“For the state not to index the personal exemption amount to inflation and the cost of living was really taking money out of the pockets of everyday people,” he said.

“I think Gov. Pritzker and the legislature should realize that a fair tax system is one that is fair to everyday people raising children, and that’s really what this tax relief is all about,” Quinn said.

Dave McKinney covers Illinois politics and government for WBEZ and was the longtime Springfield bureau chief for the Chicago Sun-Times.

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