(The Center Square) – A measure that could save small businesses in Illinois money on their taxes is now on the books.
The law will allow S-corporations and partnerships to avoid the $10,000 cap on the state and local tax deduction, known as the SALT deduction.
The sponsor of the bill, state Sen. Win Stoller, R-Germantown Hills, said the legislation has the potential to help up to 400,000 Illinois business owners save thousands of dollars annually on their federal tax filings.
“The beauty of this bill is it costs Illinois nothing,” Stoller said. “All of the tax savings are on the federal side, but we had to make a simple change in Illinois tax law to allow our small businesses to take advantage of this opportunity.”
The IRS issued a notice in 2020 essentially blessing this type of workaround in the tax code.
More than a dozen states have passed legislation to approve the workaround, including Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Georgia, Idaho, Louisiana, Maryland, Minnesota, New Jersey, New York, Oklahoma, Rhode Island, South Carolina, and Wisconsin, according to the American Institute of CPAs.
In April, Gov. J.B. Pritzker along with six other Democratic governors sent a letter to President Joe Biden urging him to remove the cap placed on State and Local Tax deductions by the 2017 Tax Cuts and Jobs Act.
According to Illinois Policy, the change benefits Pritzker. Based on his 2019 income tax returns, the governor will save an estimated $2.5 million annually on federal income taxes.
“Certainly gratifying to be able to reach back into my background, my expertise as a CPA and as a small business owner myself, and uncover this opportunity that might have been overlooked had it not been for somebody with a financial background,” Stoller said.