Navigating the Illinois Income and Property Tax Rebates

Illinois officials recently passed legislation that puts money back in the pockets of taxpayers through a program known as the Illinois Income and Property Tax Rebates.

These rebates can be taken by most Illinois taxpayers, with some exclusions, highlighting the need to understand what it is, who qualifies, and how to claim to properly assist your tax clients throughout the process.

What is the Illinois Income and Property Tax Rebates?

As a part of the Illinois Family Relief Plan, the Illinois Income and Property Tax Rebates were announced on June 30, 2022. Illinois officials realized taxpayers were struggling with the increase in the cost of living due to high interest and inflation rates. To offset a portion of the financial struggle taxpayers face, small rebates can be claimed.

The property tax rebate amount your clients can receive is equal to the property tax credit they were qualified to claim on the 2021 IL-1040 with a maximum credit of $300 (State of Illinois). The income tax rebate works in a similar manner, allowing individuals to claim a credit of $50 each with an additional $100 per dependent, up to $300. This is one way for your clients to offset a portion of their property taxes or cost of living.

These rebates are expected to be sent out the week of September 12. Your clients can expect to wait a couple of months from this issue date to receive their money, especially if their 2021 income tax return is still on extension.

Who Qualifies for the Property Tax Rebate?

To qualify for the property tax rebate, you must be:

• an Illinois resident,
• have paid property taxes in Illinois in 2020 and 2021, and
• your adjusted gross income on the 2021 Form IL-1040 must be under $250,000 for single filers and $500,000 for joint filers.

The qualifications for the income tax rebate are similar, requiring individuals to be a resident of Illinois and have an adjusted gross income under $200,000 for single filers and $400,000 for joint filers.

Many Illinois residents won’t have a problem qualifying for the rebate, but if you have high income clients, inform them why they won’t be receiving this rebate.

How to Claim the Rebates?

The rebates are automatically issued based on your 2021 IL-1040 Schedule ICR. Qualifying individuals don’t need to file an additional form requesting the rebates. However, if a taxpayer’s return is still on extension, they have until October 17 to file the Property Tax Rebate Form to claim the property tax rebate. Individuals also have until October 17 to file their 2021 IL-1040 with Schedule E/EIC to claim the income tax rebate. The sooner this form is filed, the quicker a taxpayer can expect to receive their rebate.

The rebates will automatically be sent in the same method as the taxpayer’s income tax refund. For example, if your client elected for direct deposit, they can expect their refund to be direct deposited. If they didn’t receive an income tax refund in the prior year, file a return, or are requesting the rebate separately, then the taxpayer can expect their rebates to be sent out as a paper check to the most recent address on file with the Illinois Department of Revenue.

What is the Rebate Turnaround Time?

The time it will take for the rebates to reach a taxpayer depends on the filing and payment method. Individuals who submit timely returns with a direct deposit set up will receive their refunds first. For those who submit IL-1040 after the original filing date, it takes between 90 and 120 days to process the return and an additional 5 to 10 days to approve the rebate. Form IL-1040-PTR has a processing time of 6 to 8 weeks and another 5 to 10 days to process the rebate. This makes it important for taxpayers to file their 2021 IL-1040 3-4 months before the tentative September 12 rebate date or file the Property Tax Rebate Form.

How to Check on the Status of  Your Tax Client’s Rebates?

Much like prior aid packages, the Illinois Government has tools that allow you to check on the status of your tax client’s rebates. This can be done by using the Where’s My Rebate application, which will be available close to the date rebates are expected to be issued. You will need the name, social security number, and 2021 adjusted gross income from the IL-1040 of your tax client to access the information. If the website isn’t working, contact a representative via phone (1.800.732.8866) or email and provide the same information. Keep in mind, that you may need a Power of Attorney to speak with an agent over the phone regarding your client.

Are the Rebates Taxable?

The rebates are not taxable to Illinois. However, if you itemize deductions for federal purposes, the rebate may impact your 2022 taxes by reducing the amount of property tax you can deduct on Schedule A and decreasing the amount of state income taxes paid.  This is an important consideration for your tax clients to be prepared for the upcoming filing season. Although the rebates will have a minimal impact on their tax liability, it is still important to be aware of. Additionally, the rebates are exempt from offset for state and local obligations and may be subject to offset for federal obligations.

Summary

Understanding the Illinois Income and Property Tax Rebates is important for CPAs or Enrolled Agents because your tax clients will be inquiring about eligibility. You must file the Property Tax Rebate Form (IL-1040-PTR) either electronically (through MyTax Illinois) or by paper form by October 17 if your client’s 2021 IL-1040 has not been filed by the expected time frame.

You can also check on your clients’ rebates by using the online portal, which is convenient if you are unsure if the Illinois Department of Revenue received the 2021 IL-1040 timely.

Sources

State of Illinois. “2022 State of Illinois Tax Rebates.” State of Illinois, 2022, https://www2.illinois.gov/rev/programs/Rebates/Pages/Default.aspx. Accessed 20 July 2022.

By Keith Baum,  EA
University of Illinois Tax School Instructor