As of January 1st, 38 states had major taxation changes taking effect across the US. Most of these changes represent downswing of net taxes, which is a result of rate reduction policies. Check out some of these changes:
Individual Income Tax
As of January 1st, personal income tax cuts are available in 11 states: Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire (interest revenue and dividends only), New York and North Carolina. Three of these states – Arizona, Idaho and Mississippi – will switch from a graduated income tax structure to a flat tax system on New Year’s Day.
In one state, Massachusetts, the income tax increase is in effect. The personal income tax of Massachusetts is being converted from a flat rate to a graduated rate, with a new 9% rate on income over US$ 1 million.
Five states – Alabama, Delaware, Iowa, Rhode Island and Nebraska – exempt all or part of military or retirement income from the income tax.
Corporate Income Tax and Commercial Tax Amendments
Five states: Arkansas, Iowa, Nebraska, New Hampshire. and Pennsylvania reduced the income tax aliquot.
One state, Oklahoma, will offer a permanent bonus depreciation of 100% (full cost), although the federal government is phasing out gradually the bonus depreciation to 80% in accordance with section 168 (k).
Vermont will remove its rollback rule.
Two states, Louisiana and North Carolina, will lower their capital taxes.
Taxes on sales and usage
Virginia will exempt food from the state’s sales tax base, while Kansas is gradually implementing a food sales tax exemption at a reduced rate. Several states will introduce new exemptions from major sales tax, with Colorado and Iowa exempting diapers and menstrual products, and Virginia exempting some basic hygiene products, including menstrual products.
One state, Kentucky, recently levied sales tax on selected services to help in the payment of individual income tax reductions.
Missouri has a sales tax economic nexus statute that will go into effect.
Check out other changes at: https://taxfoundation.org/2023-state-tax-changes/
Source: Tax Foundation
Written by Marcos Ferreira, Content Assistant to Drummond Advisors
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