A slew of new Illinois taxes and laws for 2025 went into effect overnight as the calendar turned to July 1.
Many of the changes and new taxes mean some things in the state will wind up costing more, including gas, cigarettes and tobacco products, and short-term rentals like Airbnb.
Minimum wage will also increase, but for Chicago only. At the start of the year, minimum wage increased for Illinois.
Here’s a breakdown of what new taxes and laws went into effect Tuesday, and how they will impact you.
Illinois gas tax increase: How much will gas cost now?
With the Illinois gas tax increasing, you’ll pay more at the pump.
The state of Illinois uses the Consumer Price Index, a federally calculated measure of how inflation is impacting prices in the U.S. economy, to help determine how much its share of the state’s fuel taxes rises each July 1.
This year, the tax is set to go up by approximately 2.69%, which will increase the tax rate by 1.3 cents per gallon. That in turn will raise the state’s gasoline tax to $0.483 per gallon, according to the state’s Fiscal Year 2026 budget.
The tax on diesel fuel will also increase to $0.558 per gallon, state officials say.
However, those tax rates do not include other levies, including sales taxes, excise taxes, federal fuel taxes and additional fees wholesalers put on fuel. When those are figured in, Illinois has one of the highest fuel tax rates in the nation, according to research by the Tax Foundation.
Chicago minimum wage: What is Illinois and Chicago minimum wage now?
Although Illinois’ minimum wage went up from $14 to $15 per hour on Jan. 1, the city of Chicago’s minimum wage for companies goes into effect on July 1 each year.
Before July 1, the city’s minimum wage was $16.20 per hour for companies with four or more employees, with tipped workers earning $11.02 per hour.
A city ordinance requires the minimum wage to increase annually according to the Consumer Price Index or at a rate of 2.5%, whichever is lower.
That means on July 1, Chicago’s minimum wage increased to $16.60 per hour, while the wage for tipped employees increased to $12.62 per hour, according to the city’s Business Affairs and Consumer Protections office.
New law impacting Illinois hotels
As part of the state’s “Small Single-Use Plastic Bottle Act,” hotels in Illinois with 50 or more rooms will be prohibited from providing small single-use plastic bottles with products like shampoo or body wash.
All other hotels in the state will have the requirement in place on Jan. 1, 2026, with state officials passing the measure to reduce plastic waste.
“According to researchers, by 2050, plastic could outweigh all fish in the oceans,” State Sen. Laura Fine said in a statement. “Personal products available in plastic bottles are common in hotels and pose immediate risk to our environment once they are thrown away. This bill puts our state on the path to being part of a solution by reducing plastic pollution.”
Cigarette tax increase, Airbnb taxes and more
The main bills taking effect July 1 in Illinois pertain to the state’s budget, meaning that several tax rate increases will hit the books.
The state will impose a tax of $0.25 per sports wager placed beginning on July 1. When 20 million wagers have been placed, that tax will go up to $0.50 per wager, according to officials.
Short-term rental properties sites like Airbnb and Vrbo will now have to charge their tenants the state’s Hotel Operators’ Occupation Tax, which they had formerly been exempted from paying. That tax comes out to a rate of 6% of 94% of gross receipts for a rental unit, according to the Illinois Department of Revenue.
Tobacco products, like cigarettes, will also now be taxed at a rate of 45% of their wholesale price, up from 36%. Certain products like vaping pens and nicotine gum will also be taxed at that rate, according to the state’s budget.
New laws in Indiana: Teacher pay increase, sex ed changes and more
A series of new laws will also take effect Tuesday in Indiana, ranging from voter registration to pro sports teams and even adjusting the state’s border with Illinois. Here’s a full list.
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