Legal Ways to Lower Your Tax Burden in Illinois
Write-offs, exemptions, deferrals, credits, transfers, and other attorney advice
on March 12, 2019
Updated on August 8, 2022
A 2018 study by WalletHub found that, collectively, residents of Illinois face the highest tax burden in the entire country. Whether you are running a small business or trying to protect your personal finances, the last thing you want to do is to pay more in taxes than you actually owe under state and federal law. And while you may think a legal professional isn’t worth the added expense, it may save you in the long haul.
“The tax code is constantly changing, and unless you’re going to research it yourself and stay on top of the news, you’re not going to be aware of the changes that occur,” says Andrew B. Gordon, a tax attorney with Gordon Law Group in Northfield.
Here is an overview of the some common (legal) things you may be able to do to lower your tax bill.
- Tax Write-offs: In most cases, the best way to lower a tax bill is to reduce your total taxable income. A tax write-off is a legitimate expense that can be deducted from a taxpayer’s total taxable income. For an individual, some common tax write-offs include medical expenses and charitable giving. For businesses, some common examples include the cost of labor and the cost of business equipment. There are several other options for itemized deductions.
- Tax Exemptions: Tax exemptions are another way in which total taxable income can be reduced. Certain income may be ‘exempt’ from being taxed at all. The most common example is the child tax exemption (another is the homestead exemption). Illinois parents can take a significant exemption for each qualifying (dependent) child.
- Tax Deferrals: In some cases, taxpayers can delay paying until a future date. Deferring taxes is an effective financial strategy for lowering costs. Doing so can offer a substantial financial advantage, as income may be taxed at a lower rate in the future or taxes may even be deferred indefinitely.
- Tax Credits: A tax credit can be subtracted directly from the total taxes that an individual owes the federal government or the state of Illinois. As noted by the Internal Revenue Service (IRS), there are a number of different tax credits available.
State and Federal Tax Laws, Credits, and Deductions
Individuals and businesses should have a general understanding of all relevant state and federal tax laws to effectively minimize their financial liability. However, that may sometimes require professional guidance to take advantage of every available tax deduction or tax credit that is available.
The same is true for avoiding the unexpected. The 2017 Tax Cuts and Jobs Act came into effect in 2018, and “made a lot of significant changes, both at the individual and business level,” Gordon says. “For businesses, one of the changes that is most surprising is that entertainment is no longer deductible. So if you want to take a prospective client or current client out to a Bulls game, that used to be a 50 percent deduction until now. Simple things like that are actually pretty significant.”
A Lawyer and/or CPA Can Help with Tax Liability
Taxes are complicated. Whether or not a deduction, credit, tax write-off, or deferral is applicable to your situation will depend on many different factors. It is crucial that taxpayers and businesses get access to the fully personalized, professional support that they need. A good tax advisor may be able to save you thousands of dollars.
“Attorneys typically cost more than accountants who cost more than your corner tax shop,” Gordon says. “That being said, there are some things we do to add more value. For example, a place like H&R Block won’t give you advice; they’re there to help you do your tax return. … Planning is where we can save clients significant amounts of money—often more than the marginal increase in hiring an attorney. It’s not always the case, but there are plenty of examples where we can legally help save a lot in taxes.”
Lawyers come with another advantage: attorney-client privilege. “That is more important to some than others, but working with a CPA or H&R Block gives you very little privilege. So, depending on your circumstances, you may want that.”
If you have questions or concerns about paying taxes or about any specific tax planning strategy such as property tax exemptions, an experienced Illinois tax attorney can offer guidance. If you want more information on this area of law, see our tax overview.