With the April 15 tax deadline nearly in our rearview mirror, it’s time to focus on significant tax law changes in Iowa, Illinois and Wisconsin that were ushered in at the start of 2025.

Here are some of the highlights that you should keep in mind.

In Iowa, the individual income tax rate dropped again.

Thanks to action taken by state lawmakers during last year’s legislative session, Iowa implemented its flat tax rate of 3.8% for all individual taxpayers as of Jan. 1, 2025.

This change simplifies the tax structure by replacing the previous graduated tax rates, and it warrants action by both companies and their workforce. Employers are required to adjust withholding amounts accordingly, and employees should update their Iowa W-4 forms to ensure accurate withholding, lest there be some surprises come year-end.

In Illinois, there are several notable changes to tax law.

For one, the state is broadening its sales tax base to include retail leases of personal property with certain exceptions (motor vehicles, watercraft, aircraft and semitrailers).

Additionally, sales tax assessed on acquisitions by retailers who lease tangible personal property now will be paid over the lease term by the final lessee of the TPP. This moves Illinois’ state sales tax into conformity with the majority of other states’ tax structures. This change also ensures that sales tax is paid by the final consumer of the eligible products, moving Illinois’ sales tax closer to that of a well-structured consumption tax.

Another Illinois sales tax change: The state will transition to destination-based sourcing for retailers that are responsible for remitting sales taxes on retail sales of tangible personal property that occur outside of Illinois but that are made by a business with a physical presence in the state.

In another new move, while Illinois allows retailers to retain 1.75% of sales taxes collected, the state now is capping the retailers’ discount on sales due at $1,000 per month.

More tax changes might be on the horizon in Illinois. This year, the General Assembly is commissioning a study of the state’s property tax system, with recommendations for improvement due by July 1, 2026. Stay tuned.

In Wisconsin, 2025 ushered in notable tax law changes in relation to child and dependent care.

The state increased the percentage of the federal child and dependent care tax credit that taxpayers can claim as a state credit from 50% to 100%. It also increased the amount of expenses that taxpayers can use to calculate their state credit, with eligible expenses capped at $10,000 for one dependent and $20,000 for two or more.

A new excise tax on electric vehicle charging in Wisconsin also took effect this year, as the state aims to generate revenue for maintaining roadways and infrastructure.

Electricity delivered into an electric vehicle now is taxed at a rate of 3 cents per kilowatt-hour. The tax applies to all Level 3 chargers, or Level 1 or 2 chargers installed on or after March 22,2024, but it does not apply to an EV charging station at a residence.

State lawmakers in Iowa, Illinois and Wisconsin will continue efforts to update and refine their tax codes. Businesses and consumers should review these updates carefully to ensure compliance and understand their impact.