Illinois LLC Taxes — Step 8 of 8
The final step: understanding what you'll actually owe. As a default pass-through LLC, profit flows to your personal return — hit with federal tax, self-employment tax, Illinois's flat 4.95% state tax, and possibly a 1.5% Personal Property Replacement Tax.
By default, an Illinois LLC is a pass-through entity — profit flows to your personal 1040, taxed federally plus 15.3% self-employment tax. Illinois then applies a flat 4.95% individual income tax — no brackets, and no standard deduction (Illinois instead uses a $2,925-per-person exemption for 2026). The detail most guides miss: multi-member LLCs (taxed as partnerships by default) also owe a 1.5% Personal Property Replacement Tax on net income — single-member LLCs (taxed as sole proprietorships) do not.
- Default tax status
- Pass-through
- SE tax rate
- 15.3%
- IL income tax
- Flat 4.95%
- IL exemption (2026)
- $2,925/person
- PPRT (multi-member)
- 1.5%
- PPRT (single-member)
- None
- Previous step
- ← Step 7
How an Illinois LLC Is Taxed by Default
Default federal pass-through treatment does not eliminate Illinois entity taxes. Classification determines replacement-tax and eligible PTE-election obligations. For tax years ending on or after December31,2026, a partnership electing Illinois PTE tax can choose either the Illinois-sourced share of all partners’ distributive income or resident partners’ full distributive shares plus nonresident partners’ Illinois-sourced income. Select the method on IL-1065. This is a partnership tax-base choice, not a universal rule for every LLC. Electing entities expecting more than $500 in tax liability must review estimated payments, including replacement tax and PTE liability, under current IDOR instructions.
- Single-member LLCs report profit on Schedule C, attached to the owner's personal Form 1040 and Illinois Form IL-1040. They're not subject to PPRT.
- Multi-member LLCs file Form 1065 federally and Form IL-1065 with Illinois, issuing each owner a Schedule K-1. They do owe the 1.5% Personal Property Replacement Tax at the entity level.
- Self-employment tax (15.3%) applies to net profit, covering Social Security and Medicare.
- Federal income tax applies via the standard progressive brackets, after the QBI deduction and standard deduction.
- Illinois's flat 4.95% tax then applies on top — using a per-person exemption ($2,925 for 2026) instead of a standard deduction.
Federal + Illinois Tax Estimator
Enter your expected net profit and select your LLC structure — this determines whether PPRT applies:
Existing simplified illustration only: excludes PTE election methods, partner sourcing, PTE credits, several federal limits and complete Illinois modifications. A member count alone does not determine federal tax classification. Use actual tax-year return instructions to prepare a return or compare elections.
The S-Corp Election Option
An S election requires eligibility, reasonable compensation, payroll and owner-specific analysis. Illinois replacement tax and the separate eligible PTE election must also be considered; there is no universal $60,000–$80,000 profit threshold.
Illinois-Specific Tax Notes
- No standard deduction — Illinois uses a per-person exemption ($2,925 for 2026) instead, and it phases out entirely above $500,000 AGI (MFJ) or $250,000 (other filing statuses).
- No preferential capital gains rate — capital gains are taxed as ordinary income at the same flat 4.95% rate.
- Pass-through entity (PTE) tax election available — Illinois allows partnerships and S-corps to elect to pay state tax at the entity level (4.95%), which can help work around the federal SALT deduction cap for owners who itemize.
- Estimated payments required if you expect to owe $500+ — quarterly estimated payments apply at both the federal and Illinois level once your liability crosses this threshold.
Partnership PTE tax-base choices from late2026
For tax years ending on or after December31,2026, a partnership electing Illinois PTE tax can choose either the Illinois-sourced share of all partners’ distributive income or resident partners’ full distributive shares plus nonresident partners’ Illinois-sourced income. Select the method on IL-1065. This is a partnership tax-base choice, not a universal rule for every LLC. Electing entities expecting more than $500 in tax liability must review estimated payments, including replacement tax and PTE liability, under current IDOR instructions.
Illinois LLC Taxes — FAQ
Ahmad Adil is the founder and CEO of LLC School. The tax figures here — the 15.3% self-employment rate, Illinois's flat 4.95% state rate for 2026, the $2,925-per-person exemption, and the 1.5% PPRT for multi-member LLCs — reflect current IRS and Illinois Department of Revenue guidance. This is educational information, not tax advice; consult a CPA for your specific situation.
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From naming your LLC to understanding your tax bill, you now have everything you need to form and run an Illinois LLC with confidence. Bookmark this guide — you'll likely come back to it as your business grows.