Could an Illinois individual subtract current-year federal itemized deductions on the Illinois income tax return?

Plain-English summary

The taxpayer could not subtract $21,933 of current-year federal itemized deductions on the Illinois return. Illinois began the individual calculation with federal adjusted gross income, which was determined before exemptions and standard or itemized deductions. Section 203 allowed no modification unless it expressly authorized one.

The recovery subtraction in Section 203(a)(2)(I) addressed a different situation: an amount included in current federal adjusted gross income under the Section 111 tax benefit rule because the taxpayer recovered an itemized deduction claimed in a prior year. The taxpayer's $21,933 was simply the total of deductions claimed on the 2009 federal Schedule A, not a prior-year recovery included in 2009 adjusted gross income. IDOR therefore upheld the disallowance.

What this means for you

Do not transfer the total from federal Schedule A to Illinois Schedule M. Use the recovery subtraction only for a qualifying prior-year itemized deduction recovered and included in current federal adjusted gross income.

Common questions

Q: Does Illinois separately allow federal itemized deductions?
A: No. They do not enter federal adjusted gross income, the starting point for the Illinois calculation.

Q: What kind of recovery could qualify for the subtraction?
A: A qualifying recovery of an itemized deduction from a prior year that was included in current federal adjusted gross income under the tax benefit rule.

Citations and references

• 35 ILCS 5/203(a)(2)(I), (h)
• IRC § 111

Subject

Subtraction Modifications – Other Rulings –

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2011/it-11-0001.pdf

Original ruling text

IT 11-0001-GIL 01/03/2011 SUBTRACTION MODIFICATIONS – OTHER RULINGS –
General Information Letter: Federal itemized deductions may not be subtracted in
computing base income of an individual.
January 3, 2011
Dear:
This is in response to your request for a letter explaining the disallowance of a subtraction claimed on
your 2009 Illinois Income Tax Return. The nature of your request and the information you have
provided require that we respond with a General Information Letter, which is designed to provide
general information, is not a statement of Department policy and is not binding on the Department.
See 86 Ill. Adm. Code 1200.120(b) and (c), which may be found on the Department's web site at
www. tax.illinois.gov.
On line 7 of the Form IL-1040, Individual Illinois Income Tax Return, you filed for 2009, you claimed a
subtraction of $21,933. This amount was reported on line 26 of the Schedule M, Other Additions and
Subtractions for Individuals, attached to your return, as a “Recovery of items previously deducted on
U.S. 1040, Schedule A (including refunds of any state and local income taxes, other than Illinois).”
Schedule A, Itemized Deductions, of your 2009 federal income tax return shows that the $21,933 was
the total amount of itemized deductions claimed for that year, and not a recovery of items deducted in
prior years.
Explanation
Under Section 203 of the Illinois Income Tax Act (35 ILCS 5/203), the computation of an individual's
"net income" taxed by Illinois begins with the taxpayer's federal “adjusted gross income,” as properly
computed for the taxable year. “Adjusted gross income” is income before taking into account
exemptions and the standard deduction or itemized deductions. Accordingly, itemized deductions are
not taken into account in computing Illinois net income.
Various addition and subtraction modifications are then made, and the resulting "base income" of an
Illinois resident, minus exemptions, is his or her net income on which tax is computed. Section 203(h)
provides that no modification may be made to adjusted gross income unless expressly provided in
Section 203.
Section 203(a)(2)(I) allows a taxpayer to subtract from his or her adjusted gross income:
An amount equal to all amounts included in such total pursuant to the provisions of
Section 111 of the Internal Revenue Code as a recovery of items previously deducted
from adjusted gross income in the computation of taxable income.
Section 111 of the Internal Revenue Code is the so-called “tax benefit rule,” which requires a
taxpayer to include in adjusted gross income any “recovery during the taxable year of any amount
deducted in any prior taxable year.” This is the provision that requires a taxpayer who claims an
itemized deduction for Illinois income tax paid in one year to include in income in a subsequent year
any refund of that tax.
Because Illinois does not allow itemized deductions, it would be improper to tax the recovery of an
itemized deduction. Accordingly, Section 203(a)(2)(I) allows a subtraction for the amount included in
federal adjusted gross income for a year resulting from the recovery of an amount “deducted from

IT 11-0001-GIL
January 3, 2011
Page 2
adjusted gross income” in a prior year, but not for the recovery of any item that was deducted in
computing adjusted gross income in a prior year. Refunds of Illinois income tax are subtracted on
line 6 of the Form IL-1040, while recoveries of other itemized deductions are reported on line 26 of
the Schedule M. The instructions for line 26 state:
Write the amount of recovery of items (including refunds of any state and local income
taxes, other than Illinois) that you deducted on your U.S. 1040, Schedule A, Itemized
Deductions, in a prior year. You must have included these items on your U.S. 1040,
Page 1, and your Form IL-1040, Line 1, for this tax year.
The statute and the instructions allow you to subtract on your 2009 Illinois return only an amount
included in your 2009 federal adjusted gross income as the recovery of an itemized deduction
claimed in a year prior to 2009. They clearly do not allow you to subtract on your 2009 Illinois return
any itemized deduction claimed on your 2009 federal return. Accordingly, the subtraction you claimed
was properly disallowed.
As stated above, this is a general information letter which does not constitute a statement of policy
that applies, interprets or prescribes the tax laws, and it is not binding on the Department. If you are
not under audit and you wish to obtain a binding Private Letter Ruling regarding your factual situation,
please submit all of the information set out in items 1 through 8 of Section 1200.110(b). If you have
any further questions, you may contact me at (217) 782-7055.
Sincerely,

Paul S. Caselton
Deputy General Counsel – Income Tax