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State guide · Illinois · 2026 rules

S corporation in Illinois: what the election changes

Illinois adds one tax a sole proprietor never pays: the 1.5% replacement tax on the S corporation’s income.

Updated October 24, 20269 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

Each state treats the election differently. The check shows only the questions that matter there.
Your business's profit after expenses. Money you take out for yourself does not lower it.
Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.
Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)
Pick the job closest to what you do most of the week.
Pick your metro area if it is listed. Pay varies by area.
Another job
Typical values: change them if you know yours
Published one-person prices: $492 to $684 a year (October 2026).
Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).
Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Not sure? Keep 22%. It changes line 5 only.
Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).
Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The replacement tax

Illinois charges an S corporation the Personal Property Replacement Income Tax at 1.5% of its Illinois net income, after your salary. A sole proprietor or single-member LLC taxed as one owes no replacement tax; the statute imposes it on corporations, partnerships and trusts.

An LLC keeps filing its $75 annual report after the election.

Payroll taxes on your salary

Unemployment insurance: 3.350% for a new employer on the first $14,250 of wages in 2026. Illinois covers every officer of a business corporation, stockholder or not.

The optional pass-through entity tax

An S corporation can elect the 4.95% pass-through entity tax each year on its Form IL-1120-ST. The owner takes a credit against Illinois income tax. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salaryStatewide
$80,000 / $45,000$174 lower
$120,000 / $60,000$2,281 lower
$200,000 / $90,000$6,471 lower

Starting payroll in Illinois

Register for withholding and unemployment insurance through MyTax Illinois.

The S corporation files Form IL-1120-ST each year; there is no separate state election.

New hire paperwork for Illinois

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status