Significant Illinois Tax Changes for 2026 Budget with Changes Dating Back to January 1, 2025

House Bill 2755 introduces several significant tax changes, including a new sports wagering tax, expanded taxation on tobacco products, a tax on short-term rentals, and tax amnesty programs. Governor Pritzker signed the bill into law last month, marking a pivotal shift in the state's tax landscape.

Sports wagering tax

Effective July 1, 2025, a new sports wagering tax will be imposed in Illinois. A tax of 25 cents per wager applies to each wager placed up to $20 million, increasing to 50 cents per wager for any wagers above that amount. Notably, this tax applies only to online wagers, excluding in-person bets. This change follows a year after increased tax brackets up to 40% were implemented on sports wagering companies, significantly impacting the betting industry in Illinois.

Short-term rentals

Beginning July 1, 2025, the Hotel Operators’ Occupation Tax (HOOT) will be extended to online booking platforms for short-term rentals. Hosting platforms, such as Airbnb, will now be considered “re-renters” and must collect HOOT on any fees or charges collected from guests, aligning short-term rental taxation with traditional hotel services.

Property leases and rentals

Leases and rentals of tangible personal property will now be treated as retail sales. This means that sales tax will need to be collected on payments as they are received, rather than on the entirety of the property at the time of purchase. This change applies to lease or rental payments made after January 1, 2025, even on existing leases or rentals. Notable exceptions include motor vehicles, watercraft, and aircraft.

Amnesty programs

The Illinois Department of Revenue will launch a tax amnesty program from October 1 to November 17, 2025. Tax liabilities must be paid in full, and returns are required to be filed during this time period. Eligible taxpayers will have penalties and interest waived upon approval. The program covers general tax liabilities not previously reported or paid for tax periods ending between July 1, 2018, and June 30, 2024. A separate amnesty program has also been established for remote retailers, which will run in 2026 from August through October.

Tobacco products tax

As of July 1, 2025, tax rates increased to 45% for both vapes (up from 15%) and other tobacco products (up from 36%). The bill also expanded the definition of tobacco products, now including additional items under the Illinois Tobacco Products Tax, aiming to address emerging products in the market.

These legislative changes reflect Illinois' proactive approach to adjusting its tax policies in response to evolving industries and fiscal needs. Residents and businesses are encouraged to stay informed about these changes to ensure compliance and take advantage of available programs.

Electric car rebate

Starting July 1, 2025, Illinois will reduce its electric vehicle (EV) rebate from $4,000 to $2,000. Low-income applicants remain eligible for an additional $2,000 rebate, maintaining the state's commitment to promoting clean energy transportation.

Please fill out the form on this page to connect with a member of our State & Local Tax Practice to start planning for any of these changes that may impact your business.