New Illinois taxes on vaping, sports betting go into effect on July 1

SPRINGFIELD, Ill. - Illinois residents will face a slew of new and increased taxes on various everyday items and services starting on July 1.

Everything from gas to sports gambling to tobacco products will be affected, namely meant to balance the state’s budget for the fiscal year 2026.

Here is a rundown of just some of the new taxes affecting Illinois residents:

Higher gas tax

The state tax on gasoline will increase from around 47 cents per gallon to 48 cents per gallon. The tax on diesel fuel will increase from about 54 cents to 55 cents.

Lawmakers voted to increase the gas tax in 2019 and tie future increases to inflation to fund needed infrastructure improvements throughout the state.

The planned increase could come at a precarious time for drivers, as escalating violence in the Middle East could also send gas prices soaring.

Tax increase on smoking products

The state tax on tobacco, vaping, and other nicotine products is increasing from 36% to 45% to raise $50 million in additional revenue.

Tax on sports betting

State lawmakers also approved a new tax on sports bets.

Sites that host sports betting will be taxed 25 cents for the first $20 million in wagers and 50 cents for each bet after that.

Officials project that the tax will raise approximately $36 million in additional revenue for the state.

The parent company of FanDuel, and DraftKings Inc., the popular sports betting platforms, said Illinois customers will soon see a new 50-cent fee added to each bet they place. The fees will start on Sept. 1, both companies said.

Flutter, the parent company, said it initially absorbed a 2024 increase in Illinois betting tax rates without passing the cost to customers. But with the new fee, the company said it could no longer absorb that cost.

"We are disappointed that Illinois policymakers have chosen to more than triple our tax rate over the past two years, and we are very concerned about what this will do to the legal, regulated industry," said Jason Robins, DraftKings CEO, in a statement. "Meanwhile, Illinois continues to fuel the rapidly growing illegal industry, which pays no taxes or fees and provides none of the consumer protections that regulated operators offer."

Tax on short-term rentals

Starting on July 1, short-term rental companies will have to begin paying the state’s hotel-motel operators’ tax.

Airbnb, the popular short-term rental company, already pays the tax voluntarily, according to Capitol News Illinois. The tax now being required of other rental companies is expected to raise another $10 million in revenue.

Telecommunications tax increase

The existing tax on telecommunications services will increase from 7% to 8.65%.

Telecommunications, including everything from messages through telephone services, computer services, and cell phone services, among others, are subject to the tax.

The increase is expected to generate another $50 million in revenue.

‘Costs on businesses’

While Gov. JB Pritzker said he would veto any broad-based tax increases on Illinois residents, the new taxes and charges on specific products and services prompted criticism from Republicans and business groups.

In a statement, the Illinois Chamber of Commerce said in part:

"While we applaud the economic development package that aims to attract and retain good jobs and employers, we are disappointed by the costs on businesses contained in the final budget package, which will harm the state’s business climate and growth opportunities. As policy impedes growth, it impacts jobs, and that, in turn, affects communities all across the state."