Recent Changes to Illinois Withholding Exemption Amounts

Effective June 7, 2023, Public Act 103-0009 has maintained the 2022 Illinois Individual Income Tax
personal exemption allowance at $2,425 for 2023. This is a $200 decrease from the previously projected amount for 2023, which was $2,625. Essentially, this means that the exemption amount has returned to the same level as it was in 2022.

It's important to note that the Illinois individual income tax rate remains unchanged at 4.95 percent. This change primarily impacts the IL withholding income tax payment amounts for Illinois employees in 2023.

Employers, payroll service providers, and software developers should review the updated 2023 Booklet IL-700-T, Illinois Withholding Tax Tables, and apply the new formula for employees who claim allowances. A formula to calculate catch-up withholding has been added as an addendum to 2023 Booklet IL-700-T.

On July 2, 2023, Illinois issued an informational bulletin providing updated tax tables and instructions for employers and payroll software developers to calculate amounts for catch-up withholding. This bulletin is a valuable resource to ensure accurate calculations and compliance with the new regulations.

For employees with IL wages in the first half of 2023, the amount of the income tax withheld for the remainder of the 2023 tax year may need to be adjusted. For some employees, the recalculated amount will result in no net change; however, for some, it will result in a larger amount of tax withheld from each pay period remaining in 2023.

Individual taxpayers who make estimated payments and typically annualize their income may need to increase their payment amounts for the third and fourth quarters of 2023. However, taxpayers with an adjusted gross income for the taxable year that exceeds $500,000 with a federal filing status of married filing jointly, or $250,000 for all other returns, are not entitled to personal exemption allowances and are not affected by this change.

Employees who are concerned with their withholding amounts for 2023 may complete a new Form IL-W-4, Employee’s and other Payee’s Illinois Withholding Allowance Certificate, to update their exemption allowances and Illinois withholding.

For additional information on updated 2023 withholding income tax amounts and how to calculate
catch-up withholding for the remainder of the tax year, you can refer to the updated 2023 Booklet IL-700-T on the official website at tax.illinois.gov.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.