Illinois officials remind business owners about tax credit to offset minimum wage hikes
Illinois officials are reminding small business owners about a tax credit that is available to offset some of the higher labor costs associated with the increase in the state's minimum wage.
The tax credit is available to small business owners and nonprofit organizations with 50 employees or less.
Illinois Department of Revenue spokesman Sam Salustro said the credit will extend into 2026, at varying levels.
"The tax credit is designed to help small businesses offset the state's minimum wage rate," Salustro said. "Eventually, which will reach $15 an hour."
Illinois' minimum wage increased to $9.25 an hour on Jan. 1 and will increase to $10 an hour on July 1. After that, the state's minimum wage will increase $1 an hour per year until it reaches $15 an hour on Jan. 1, 2025.
The tax credit went into effect on Jan. 1. Businesses can claim the credit on their quarterly Form IL-941 Illinois Withholding Income Tax Returns.
"The maximum credit allowed is 25 percent of the difference between the new minimum wage and what the employee was previously paid," Salustro said.
The maximum credit allowed will decrease each year, sunsetting in 2026 for most small businesses.
The state's minimum wage was last increased in 2010 to $8.25. The Illinois Department of Revenue cited statistics provided by the Illinois Economic Policy Institute at the University of Illinois that this year's minimum wage increase was expected to affect about 1.4 million Illinois workers.
Acting IDOR Director David Harris encouraged small businesses to take advantage of the tax credit.
"Along with a new capital bill and tax credits for apprenticeship programs and research investments, this measure will help fulfill this administration's goal of fostering an environment that will grow jobs and reward hardworking families," Harris said.
Information on the available tax credit, including tax credit calculation and withholding information, is available online at tax.illinois.gov.