Nearly 400,000 small business owners will have their federal taxes cut thanks to legislation sponsored by State Senator Win Stoller (R-Germantown Hills) that just became law.
Leaders in both parties have said they have never seen such consequential legislation sponsored by a freshman Senator. Stoller’s SB 2531 is his fourth bill to become law in his first year in office.
“We live in a state which has one of the highest overall tax burdens in the entire nation,” said Sen. Stoller. “While we still have more work to do when it comes to alleviating our state’s high tax problem, I’m proud to have passed legislation that will ease some of that burden for our struggling small business job creators.”
Senate Bill 2531 redefined Illinois tax law to allow pass-through businesses, such as S-corporations and partnerships, to avoid the $10,000 cap on the State and Local Tax (SALT) deduction that was created by the federal Tax Cuts and Jobs Act in 2017. This bill puts small businesses on an equal par with large corporations and levels the playing field regarding competitiveness.
Until now, owners of pass-through entities reported their share of business income on their individual income tax return. This meant that they were subjected to the $10,000 deduction cap on state and local taxes. With a simple change to the state’s tax code, SB 2531 allows up to 400,000 Illinois small business owners to save thousands of dollars on their federal taxes.
“This legislation is a common-sense approach to help out our state’s small businesses as they deal with the effects of the ongoing COVID recession,” said Illinois Chamber of Commerce President and CEO Todd Maisch. “Senator Stoller’s bill has the potential to help thousands of Illinois business owners while they try to recover. I would like to thank Senator Stoller for recognizing the ongoing struggles of our business community and sponsoring this critical piece of legislation.”
Sen. Stoller’s State and Local Tax deduction (SALT) bill allows a small business to elect to be taxed at the entity level, instead of letting the income pass through to their personal return. The owner would then claim an offsetting credit on their state return. While the new law will help struggling small business owners by cutting their federal taxes, it would have no cost to the state of Illinois.
“The Illinois CPA Society was delighted to support this legislative initiative because it provides help to small business owners in challenging economic times and is revenue neutral for the state,” said Illinois CPA Society Vice President of Government Relations Martin Green.
Senate Bill 2531 passed both the Illinois Senate and House unanimously, and was recently signed into law.