FY 2027-01, 2026 Income Tax Changes That May Impact Current Tax Year Liabilities

FY 2027-01, 2026 Income Tax Changes That May Impact Current Tax Year Liabilities

Public Act 104-0468 became effective July 1. It amends the Illinois Income Tax Act (IITA) and may affect tax year liabilities for certain taxpayers.

For tax years ending on or after December 31, 2026, Illinois decouples from the Internal Revenue Code (IRC) Section 1202 provision, requiring individuals, trusts and estates, and partnerships to add back any federally excluded Qualified Small Business Stock gains to their Illinois base income or loss.

For tax years ending on or after December 31, 2026, partnerships electing to compute and pay PTE tax may now choose between two methods for determining their tax base:

1. Paying PTE tax on the Illinois-sourced portion of all partners' distributive shares, or
2. Paying PTE tax on the full distributive shares of resident partners plus Illinois-sourced income of non-resident partners.

Partnerships must select which method of determining the tax base they will use to calculate the PTE tax on the IL-1065.

See Informational Bulletin FY 2027-01, 2026 Income Tax Changes That May Impact Current Tax Year Liabilities, for more information.