Illinois Extends Key Business Tax Credits: 6 Incentives Businesses and Investors Should Know About
As part of the 2026 Spring Legislative Session, Illinois lawmakers extended several tax credit programs designed to support business investment, innovation, workforce development, affordable housing, and redevelopment throughout the state.
While much of the recent tax conversation has focused on new revenue measures, these extensions preserve several incentives that businesses, investors, developers, and employers may want to keep on their radar.
Below are six Illinois tax credits that were extended, and why they may matter. Please note that certain credits may require advance approval, certification, and/or reservation before a taxpayer can claim a credit. Certain credit programs also have caps that limit the availability during a tax year.
1. Research & Development Tax Credit Extended Through 2036
The Illinois Research & Development Tax Credit is available for certain qualifying expenses tied to research activities conducted in Illinois.
The credit is equal to 6.5% of qualifying research expenditures that exceed a base amount, making it particularly valuable for businesses increasing their investment in research and development activities. Because the credit is based on incremental spending, companies that continue to innovate and expand their research efforts may see greater tax benefits over time. Qualification hinges on a taxpayer’s ability to demonstrate the existence of technical uncertainty as to design, method or capability (i.e., no readily available information providing a resolution to technical issue) at the outset of the development effort. Taxpayers should retain documentation (formal or informal) developed contemporaneously during the development effort.
Examples of qualifying activities may include:
- Developing new or improved products
- Enhancing manufacturing processes
- Designing or testing prototypes
- Creating or improving software applications
- Conducting engineering or technical experimentation
The credit may be especially relevant for manufacturers, technology companies, engineering firms, life sciences businesses, and other organizations investing in new or improved products or processes in Illinois.
2. Angel Investment Tax Credit Extended Through 2032
The Illinois Angel Investment Tax Credit is designed to encourage investment in innovative, early-stage Illinois companies.
Investors who make qualifying investments of at least $10,000 in companies certified as Qualified New Business Ventures (QNBVs) may receive a state tax credit equal to 25% of their investment, up to $2 million. Investors in certain designated Set-Aside QNBVs may qualify for a 35% credit, also up to $2 million. An eligible investor may include a natural person, corporation, partnership, or limited liability company. Such investor may not have a direct or indirect ownership interest of at least 51% in the profits, capital, value of the QNBV or related member. Recapture of a claimed credit may occur if the investor holds the investment for less than three years or the QNBV moves from Illinois.
For startups, the program can be valuable because it may help make the business more attractive to potential investors. For investors, it may help reduce Illinois income tax liability when investing in eligible early-stage companies.
Due to an annual cap of $15 million that is allocated on a first-come first-served basis, business ventures should consider registering and applying for an allocation as soon as possible.
3. Affordable Housing Tax Credit Extended Through 2036
The Illinois Affordable Housing Tax Credit encourages private investment in affordable housing. Credits are available for Chicago projects approved by the Chicago Department of Housing and Economic Development and for projects elsewhere in Illinois as approved by the Illinois Housing Development Authority,
The program provides donors of qualified donations with a one-time Illinois income tax credit equal to 50% of the value of the donation. Eligible donations may include money, securities, real estate, or personal property contributed to a qualified nonprofit affordable housing sponsor for an affordable housing project.
This credit may be relevant for developers, investors, nonprofit sponsors, and businesses interested in supporting affordable housing projects while potentially receiving a state tax benefit.
4. Apprenticeship Education Expense Credit Extended Through 2031
The Illinois Apprenticeship Education Expense Tax Credit supports employers that hire and train qualified apprentices.
Participating employers may receive a credit of $3,500 per eligible apprentice annually. An additional $1,500 credit may be available if the apprentice resides in an underserved area or if the employer’s business is located in an underserved area.
The apprentice must be an Illinois resident who is at least 16 years of age. The apprentice must be enrolled full-time in a U.S. Department of Labor registered apprenticeship program during the school year and be employed by the taxpayer in Illinois. Employers seeking to claim the credit must be an Illinois taxpayer that maintains a qualified apprenticeship program or partners with a qualified apprenticeship program. Eligible employers must submit an application to the Illinois Department of Commerce and Economic Opportunity (DCEO) for certification of education expenses incurred prior to claiming the credit. An annual cap of $5 million requires interested taxpayers to take action in a timely fashion.
The credit may be especially useful for employers investing in workforce development, skilled trades, manufacturing, construction, and other industries where training and talent development are a priority.
5. River Edge Redevelopment Historic Tax Credit Extended Through 2033
The River Edge Redevelopment Historic Tax Credit is intended to encourage redevelopment and historic preservation in designated River Edge Redevelopment Zones.
The program supports projects involving certified historic structures located within designated zones. The River Edge Historic Tax Credit generally provides a state income tax credit equal to 25% of qualified rehabilitation expenditures for eligible projects. A taxpayer must apply with the State Historic Preservation Office within the Department of Natural Resources to obtain a credit allocation and submit a certification of costs prepared by an independent CPA to claim the credit.
This credit may be particularly relevant for developers, real estate investors, historic property owners, and communities pursuing revitalization projects in designated River Edge areas.
6. Reimagining Energy and Vehicles Illinois Tax Credit Extended Through 2028
The Reimagining Energy and Vehicles (REV) Illinois Tax Credit is designed to attract and retain electric vehicle and clean energy manufacturing investment in Illinois.
Businesses that make qualifying investments in electric vehicle manufacturing, electric vehicle component manufacturing, or clean energy manufacturing facilities in Illinois may be eligible for a credit against Illinois income tax. The credit is calculated as a percentage of qualifying investment and new employee withholding, making it potentially significant for capital-intensive manufacturing projects with a substantial workforce component.
To participate, a business must apply and negotiate with DCEO to enter into an agreement outlining the investment and job creation commitments. Credit amounts and terms are negotiated based on the specific project, and businesses must meet their commitments to avoid recapture. At a minimum, REV benefits are available for projects starting at $2.5 million capital investment and creating 50 jobs or 10 percent of the company’s statewide baseline.
The REV Illinois program may be especially relevant for manufacturers, suppliers, and developers involved in electric vehicles, batteries, charging infrastructure, and other clean energy sectors looking to establish or expand operations in Illinois.
If you have questions about any of these programs or would like to discuss potential eligibility, contact FGMK. Our team can help evaluate available incentives and identify opportunities based on your specific circumstances.