Chicago Enacts Significant Tax Increases

On Dec. 16, 2024, the Chicago City Council approved the city’s budget, which includes tax increases on cloud computing and other activities.

Crowe observation

Although Chicago Mayor Brandon Johnson promised not to raise property taxes, his initial budget proposal included a $300 million property tax increase. The final budget approved by the city council included other tax and fee increases in lieu of a property tax increase.

Personal property lease transaction tax

Chicago’s personal property lease transaction tax is a tax imposed on the lease or rental of personal property within the city, which includes cloud computing and software as a service.

Starting on Jan. 1, 2025, the tax on the lease or rental of personal property increases from 9% to 11%.

Other new and enhanced taxes and fees for 2025

• Checkout bags. The single-use paper and plastic bag tax is increased from 7 cents to 10 cents. Additionally, a retailer may retain only 1 cent per bag to cover costs (decreased from 2 cents per bag). Retailers might need to make changes to their sales tax engines to account for the change.
• Streaming services. Taxes on amusement devices and streaming services increase from 9% to 10.25%.
• Ride sharing. An additional surcharge is added to rideshare weekend trips.
• Parking. Parking garage and valet service taxes increase from 20% on weekends and 22% on weekdays to 23.25% every day.

Looking ahead

The tax on cloud computing often is used to plug budget gaps. First implemented in 2016 and subject to frequent rate increases, the tax is viewed by the business community as stunting to economic growth and limiting to the city’s ability to attract technology businesses. The mayor has acknowledged that he will continue to seek new revenue sources to address budget shortfalls. Current and prospective Chicago taxpayers should work with their tax advisers to monitor Chicago political developments for proposed and enacted tax increases.