June 16, 2026 Aidan Boleyn-Fitzgerald and Shaurya Vohra
We previously highlighted four Illinois tax changes that will raise revenue and impact our economy. This blog highlights three tax credit extensions and one expanded tax deduction that will impact small businesses.
Extension of the Research and Development Credit
Illinois offers a tax credit equal to 6.5% of the amount a business spends on in-state research and development above its average spending over the prior three years. Only new or increased R&D spending qualifies for the credit. The credit was set to expire at the end of 2031, but has now been extended through the end of 2036.
Extension of the Angel Investment Credit
Illinois offers a tax credit to investors who invest in qualifying early-stage Illinois businesses. The credit is worth 25% of the investment, or 35% if the business is minority-owned, women-owned, disability-owned, or is located in a county with a population under 250,000. The minimum qualifying investment per business is $10,000, and the maximum is $2 million. The credit was set to expire at the end of this year, but has now been extended through the end of 2032.
Extension of the Apprenticeship Education Expense Credit
Illinois offers employers a $3,500 income tax credit for each qualifying apprentice they employ, covering costs like tuition and training materials. Employers hiring from or in underserved areas receive an additional $1,500 per apprentice. The program is capped at $5 million in credits each year on a first-come, first-served basis. The credit was set to expire at the end of this year, but has now been extended through the end of 2031.
Expansion of Net Operating Loss Deduction Limits
Illinois currently caps the amount of net operating losses a corporation can deduct at $500,000 per year. Starting next year, the cap will shift to 15% of net income or $500,000, whichever is greater. It will increase annually until it reaches 80% of net income in 2031. This change will allow businesses that experienced losses in prior years to offset more of their taxable income as they recover and grow, reducing their tax liability and improving cash flow.
Our next blog will highlight provisions in the Budget Implementation Act (BIMP) that will impact some small businesses.
Shaurya Vohra is a Policy Research Intern at the SBAC and a rising sophomore at the University of Chicago studying Economics and Data Science.