New Illinois laws, taxes starting July 1 include single use plastic restrictions, tipped minimum wage increase, vape tax
Several new Illinois laws and tax increases take effect on July 1, 2025, including new rules for single-use plastics, a tipped minimum wage increase, and taxes on sports bets, vaping and gas.
There are also new taxes and new rules for short-term vacation rentals and a general Chicago minimum wage increase.
Here are some of the biggest changes set to take effect on Tuesday.
Chicago minimum wage and tipped minimum wage increases
Unlike the rest of the state of Illinois, Chicago's minimum wage increases happen annually on July 1.
This year, the general Chicago minimum wage will go up to $16.60 for employers with four or more employees, while the tipped minimum wage will rise to $12.62 per hour.
The minimum wage increases are part of the One Fair Wage Ordinance approved in 2023 to eventually bring tipped wages up and in line with the same minimum wage as all other city workers.
The tipped workers' minimum wage will continue to increase 8% each year until it reaches the city's minimum wage for non-tipped workers in 2028.
Some restaurant owners say the increases have caused a great strain on their businesses, leaving them to choose between passing the cost to customers through prices or hiring less staff.
A similar initiative was passed in Washington, D.C. in 2022 to much fanfare. But Mayor Muriel Bowser has now called for its repeal, saying the method is failing employees and small businesses.
There is some talk of the tipped minimum wage hike effort moving to all of Illinois.
Tobacco and vape produce tax increase
Taxes on vapes, nicotine pouches, cigars and other tobacco products increase on July 1 from 15% to 45%.
The move is expected to generate nearly $30 million in new revenue for the state.
Taxes on cigarettes are also increasing $1 per pack on Tuesday.
The Illinois Fuel & Retail Association, which represents gas stations in Illinois, is concerned that the vape, pouch, and tobacco tax could send some potential customers across state lines.
Gas tax hike
From July 1 through June 30,2026, Illinois gas tax rates are increasing.
Gasoline will now be taxed $0.483 per gallon up from $0.47 per gallon last year. Diesel fuel will be taxed at $0.558 per gallon, up from $0.545 per gallon last year.
Small single-use plastic bottles outlawed from hotels
The Small Single-Use Plastic Bottle Act takes effect on July 1 and bans hotels with 50 rooms or more from providing small single-use plastic bottles containing shampoo, conditioner, soap and other personal care products.
Hotels will instead stock those items through larger, refillable dispensers in bathrooms and showers. The law aims to cut down on single-use plastic waste in the hospitality industry.
The law went into effect on Jan. 1, but hotels were given until July 1 to be in compliance.
Tax on online sports betting
Starting July 1, Illinois sportsbooks will pay $0.25 on the first 20 million online bets statewide annually, and then $0.50 on every bet after that.
While sports betting companies like FanDuel and DraftKings are expected to eat the costs for a period of time, FanDuel has already said it will begin charging a 50 cent fee on every wager placed in Illinois on Sept. 1, 2025. DraftKings followed shortly with their own announcement of the same 50 cent fee also starting Sept. 1.
Airbnb, VRBO subject to Hotel Occupation Tax
Starting July 1, short-term rentals offered through sites like Airbnb and VRBO will be subject to the state's Hotel Operators' Occupation Tax of 6% of 94% gross receipts.
Short term rental business owners are responsible for paying the tax, but may pass the cost along to their guests. The hotel tax is on top of other state and local lodging taxes already in effect for short-term rentals.
