Illinois does not have a personal property tax on individuals. If you own a car, furniture, tools, or other belongings, you owe no annual Illinois tax on their value. The 1970 Illinois Constitution required the General Assembly to abolish all ad valorem personal property taxes by January 1, 1979, and it forbade reinstating any that had already been abolished.1Illinois General Assembly. Illinois Constitution – Article IX – Section 5 Businesses are a different story. To replace the revenue local governments lost when the business personal property tax ended, the legislature created the Personal Property Replacement Tax (PPRT), which is imposed on business net income at rates between 0.8% and 2.5% depending on entity type.2Illinois Department of Revenue. Personal Property Replacement Tax – Local Governments
What Individuals Owe: Nothing
The individual personal property tax was abolished in 1969 as part of the package that created the Illinois income tax. The 1970 Constitution then wound down the remaining ad valorem personal property taxes on businesses by the 1979 deadline.1Illinois General Assembly. Illinois Constitution – Article IX – Section 5 You will not receive a bill based on the assessed value of your vehicle, boat, household goods, or any other personal item you own in Illinois. The name of the replacement tax causes confusion, but the PPRT does not reach individuals at all. It is paid only by business entities, and it is measured by income, not by the value of any property.
What Businesses Pay: The Replacement Tax
Every corporation, partnership, trust, and S corporation that earns or receives income in Illinois owes the PPRT on top of the regular Illinois income tax. The rates are set by statute:3Illinois General Assembly. 35 ILCS 5/201 – Tax Imposed
- C corporations: 2.5% of net Illinois income
- S corporations: 1.5% of net Illinois income
- Partnerships: 1.5% of net Illinois income
- Trusts: 1.5% of net Illinois income
- Public utilities: 0.8% of invested capital
Net Illinois income generally starts with federal taxable income, then applies Illinois-specific adjustments. Because the base is income, deductions like depreciation and ordinary business expenses that reduce federal taxable income also reduce what you owe for PPRT purposes. A business with no profit owes no replacement tax, no matter how much equipment or inventory it holds.
Businesses operating in more than one state apportion income to Illinois using statutory formulas that depend on entity type and activity. Over-apportioning income to Illinois means overpaying both the regular income tax and the PPRT, so the apportionment calculation is worth reviewing each year, especially when employees, customers, or physical operations shift across state lines.
How and When to File
The PPRT is reported on the same return as the regular Illinois income tax, not on a separate form. Corporations file Form IL-1120, S corporations file Form IL-1120-ST, partnerships file Form IL-1065, and trusts file Form IL-1041.2Illinois Department of Revenue. Personal Property Replacement Tax – Local Governments
Returns are due on the 15th day of the third month after the close of the taxable year, which lands on March 15 for calendar-year filers. Illinois grants an automatic seven-month extension to file, pushing the extended deadline to October 15 for calendar-year entities.4Illinois Department of Revenue. Who Must File Form IL-1120-ST and When Is Its Due Date? An extension to file is not an extension to pay. Any tax owed is still due on the original date.
Estimated Payments
Corporations must make quarterly estimated payments if their combined Illinois income tax and replacement tax liability is expected to exceed $400 for the year. There are no exceptions to this rule for corporations.5Illinois Department of Revenue. Pub-105, Estimated Payments Requirements
S corporations and partnerships are different. They must make estimated payments only if they elect to pay the pass-through entity tax and expect their liability to exceed $500 for the year. Without a PTE election, these entities do not have to prepay the annual PPRT liability through quarterly installments.5Illinois Department of Revenue. Pub-105, Estimated Payments Requirements
Penalties and Interest
Illinois charges separate penalties for filing late and for paying late, and both can apply at once.
On the filing side, missing the deadline (including any extension) triggers a first-tier penalty of 2% of the tax due, capped at $250. If you still have not filed within 30 days after the Department of Revenue sends a nonfiling notice, a second-tier penalty applies: the greater of $250 or 2% of the tax shown on the return, up to $5,000. The second-tier figure is calculated without reducing for timely payments.6Illinois General Assembly. 35 ILCS 735/3-3 – Penalties
Payment penalties scale with how late the money is. Pay within 30 days of the due date and the penalty is 2% of the unpaid tax. After 30 days it jumps to 10%.7Illinois Department of Revenue. Publication 103, Penalties and Interest for Illinois Taxes That jump is a strong reason to pay whatever you can by the original due date even if the return itself needs an extension.
Interest accrues daily on any unpaid tax from the day after the due date until the balance is cleared. The rate is simple interest tied to the federal underpayment rate, which the Department reviews on January 1 and July 1 each year. From January 2025 through June 2026, the underpayment interest rate is 7%.8Illinois Department of Revenue. Interest Rates
Out-of-State Businesses
If your business sits outside Illinois but earns income in the state, you may owe the PPRT. The question turns on whether your Illinois activities create enough of a connection, or “nexus,” to subject you to the tax. Illinois follows the constitutional standards developed by the U.S. Supreme Court, which require a substantial connection between the state and the business.
Federal law gives some out-of-state sellers a shield. Under Public Law 86-272, a state cannot impose a net income tax on a company whose only in-state activity is soliciting orders for sales of tangible personal property, provided those orders are approved and filled from outside the state.9Cornell Law Institute. Illinois Admin Code Title 86, Section 100.9720 – Nexus Illinois applies this protection to both the regular income tax and the PPRT. If a nonresident business goes beyond mere solicitation, however, the protection falls away for the entire taxable year.
A few activities commonly push a business past the solicitation line: maintaining a warehouse or office in Illinois, providing post-sale services through company employees, and conducting installation or training work in the state. The line is fact-specific, and crossing it without recognizing you have done so can create back liability plus interest and penalties running to when the nexus first arose.
A Note on Appeals
The Board of Review, the Property Tax Appeal Board, and the circuit court appeal path all exist to challenge real estate assessments.10Illinois Department of Revenue. Assessment Appeals – Property Tax None of them handle PPRT disputes. If you disagree with a PPRT assessment or penalty, your remedies run through the Illinois Department of Revenue’s administrative process.