The Illinois House recently passed a $53.1 billion state budget that includes a more generous tax credit. This enhanced tax credit, known as the standard exemption, will provide families with approximately $69 in savings. The budget proposal is currently awaiting the governor’s approval.
What Is the Bigger Tax Credit from Illinois?
The standard exemption has been increasing annually since 2011 to align with inflation. Last year, lawmakers reduced this tax credit by disconnecting it from inflation, following a significant rise in the consumer price index (CPI) due to COVID-19-related supply chain disruptions.
The new spending plan for 2025, approved by the House, reconnects the standard exemption to inflation, resulting in a larger tax credit. Under the updated plan, taxpayers can claim a standard exemption of up to $2,775 for the 2024 tax year, an increase from $2,425 in 2022 and 2023.
This adjustment will lead to tax savings of more than $69 for a family of four. The larger tax credit is estimated to cost $172 million, nearly double the modest increase initially proposed in the governor’s 2025 budget plan.
The governor’s proposal had suggested raising the exemption to $2,550, which would have cost around $93 million.
Had lawmakers adjusted the standard exemption for inflation last year, it would have been $2,625 in 2023, reflecting an 8% rise in the CPI—the highest inflation increase since 1981.
By maintaining the standard deduction at $2,425 for 2023, lawmakers were able to redirect $114 million to other budgetary needs.
The standard exemption is designed to reduce taxpayers’ adjusted gross income.
Other Tax Relief for Residents
Another form of tax relief included in the $53.1 billion state budget is the elimination of the state grocery tax. Since this relief directly benefits local communities, the proposal allows municipalities to impose their own grocery tax of up to 1%.
The governor initially called for the removal of the grocery tax during a budget address earlier this year, arguing that it would provide significant relief to families burdened by rising prices. The governor described the 1% tax as a “regressive tax” that Illinois no longer needs.
“If it helps reduce inflation for families from 4% to 3%, even if it only puts a few hundred dollars back in their pockets, it’s the right thing to do,” the governor stated.
Currently, the 1% grocery tax applies to all items intended for consumption off the premises where they are sold.