6 tips on how to minimize the effects of the new income tax in Illinois

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The impact of the increase in income tax on 32%, approved by the state legislature of Illinois earlier this month, should soon affect salaries.

“For a lot of people, this won’t be a big deal,” said Jeffrey Harlow, CPA from Kessler Orlean Silver & Co. of Deerfield.

Raising the tax rate that individuals must pay up to 4,95% from 3,75% means paying an extra $ 12 in government taxes on every $ 1000 income.

Thus, one person with $ 40 000 annual income, according to the federal adjusted gross income, will pay $ 480 in the form of additional taxes annually. A couple with two children and an income of $ 100 000 will pay about $ 1200 of additional taxes annually.

At the same time, low-income people will not pay the full amount of the tax. But people with incomes above the average will pay tax over 32%. So, people with an income of $ 501 000 per year will pay about $ 24 800 taxes per year.

Tax experts say there are a number of mechanisms that Illinois residents can use to control and, possibly, minimize the impact of tax increases.

1. Keep track of your salary

Employers are responsible for deducting additional tax from wages and sending them to the state. The new tax law came into force on July 1, so you may see a large amount of tax deducted earlier, as some companies apply a retrospective system.

2. View the discount on your form W-4

Be sure to check the amount you send to pay taxes and recalculate it, taking into account the tax increase. If this is not done in a timely manner, you can get a large fine. On the other hand, if you pay regularly from month to month to get a bigger tax refund, you can wait and make adjustments after you receive a salary that takes into account the new tax. This calculator can help: www.tinyurl.com/y89xb74o

3. Save more with 401 (k), IRA and retirement accounts

Everything that you invest in a traditional retirement plan will be taken into account and, therefore, will significantly reduce your taxes. You are allowed to accumulate up to $ 18 000 annually in 401 (k) or $ 24 000 if you are older than 50 years. In IRA, the maximum annual contribution is $ 5 500 or $ 6500 if you are older than 50. In addition, people who do business or work as independent contractors can apply a savings plan to a business. Experts recommend considering plans such as SEP IRA, Simple IRA or Solo 401 (k).

4. Save for college

In Illinois, you can also get state tax deductions if you save money on college education for your child on one of two 529 plans for state retirement. Contributions to your starting account Bright taxable - up to $10 per parent per year. However, you should understand that the deduction is not available if you have a 000 plan in another state. Once the money is in any 529 account, you won't pay any taxes on the earnings or the money you withdraw when it comes time to pay for college.

5. Beware of high income group

$ 250 000 dollars for one person, or $ 500 000 for a married couple. Experts advise to beware of additional income. For example, selling a home can lead you to an income level of $ 500 000. This means that income will be subject to additional tax.

6. Be careful with temporary income.,

based on state taxes. Some may try to make dramatic changes this year—perhaps selling an expensive home or investing before 2018, when state taxes will be 4,95% for the entire year. This year, the higher tax only applies to the second half of the year, and the combination of 4,95% and 3,75% tax rates could mean you'll be taxed at 4,35% for the year. But state taxes are small compared to federal taxes, and Harlow said the future of federal taxes should be considered before tax changes are made. The federal tax system could be overhauled in 2018, Harlow said. He advises not to make any decisions until there is clarity.

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