Net income subject to Illinois income tax begins with federal "adjusted gross income" for individuals and federal "taxable income" for all other taxpayers. "Adjusted gross income" is taxable income before exemptions, the standard deduction, or itemized deductions are considered. Any federal law that changes the computation of adjusted gross income or taxable income automatically changes the computation of Illinois net income, unless a specific provision of Illinois law reverses the effect of federal law.
In Public Act 92-603, the Illinois General Assembly disallowed the 30% bonus depreciation deduction allowed by the Job Creation and Worker Protection Act. Under this legislation, the Illinois Income Tax Act (IITA) requires taxpayers to add back any bonus depreciation claimed and allows them to subtract an amount equal to 42.9% of their regular depreciation deduction on assets for which the 30% bonus depreciation was claimed. As the IITA was amended, it also requires taxpayers to add back the 50% bonus depreciation deduction allowed by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Taxpayers who have claimed 50% bonus depreciation on an asset are allowed to subtract 42.9% of the regular depreciation on that asset for tax years ending on or before December 31, 2005. For tax years ending after December 31, 2005, taxpayers may subtract 100% of the regular depreciation on an asset they claimed 50% bonus depreciation. Use Form IL-4562, Special Depreciation, to report these amounts. For more information refer to
FY 2003-02 Illinois Decouples from Federal Law, or
Form IL-4562, Special Depreciation.