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Step 2 - Income

Line 1

Adjusted gross income

Enter the adjusted gross income from your federal return. If you are not required to file a federal income tax return, use a federal Form 1040 as a worksheet to determine your adjusted gross income.

Net operating loss (NOL)

If you have a federal NOL this year, you may enter a negative amount on Line 1. However, you must reduce the amount you enter on your 2023 Form IL-1040, Line 1, by any NOL that you carry back to prior years.

If you deducted an NOL carryforward on your federal return for this year and some of that NOL remains available to carry forward to next year, your loss is limited to the amount used in this tax year to reduce your federal taxable income. Any amounts carried forward to future years should not be used to reduce IL-1040, Line 1. Illinois does not allow you to deduct the same NOL twice.

Line 2

Federally tax-exempt income

Enter the amount of federally tax-exempt interest and dividend income reported on federal Form 1040, U.S. Individual Income Tax Return, Line 2a.

Note: Your distributive share of federally tax-exempt interest and dividend income received from a partnership, S corporation, trust, or estate is added back on Schedule M, Line 2.

Line 3

Other additions

Complete Schedule M if you have any of the following items:

  • your child’s federally tax-exempt interest and dividend income as reported on federal Form 8814
  • a distributive share of additions you received from a partnership, S corporation, trust, or estate
  • Lloyd’s plan of operation loss, if reported on your behalf on Form IL-1065, and included in your adjusted gross income
  • earnings distributed from IRC Section 529 college savings and tuition programs and ABLE plans if these earnings are not included in your adjusted gross income, Line 1
  • an addition amount calculated on Form IL-4562, Special Depreciation
  • business expense recapture (nonresidents only)
  • recapture of deductions for contributions to Illinois college savings plans and ABLE plans transferred to an out-of-state plan
  • credit received on Schedule 1299-C for student-assistance contributions made as an employer on behalf of your employees
  • deductions claimed in prior years for college savings plan and ABLE plan contributions if you made a nonqualified withdrawal this tax year
  • any other amounts that you are required to add to your federal adjusted gross income

For more information, see the Schedule M Instructions.

Attach: Schedule M and any required supporting documents.