Change is a constant when it comes to life. And since taxes are a big part of life, that means we deal with tax code changes, too.
At the federal level, that happens automatically every year when the Internal Revenue Service makes inflation adjustments to a wide variety of existing laws.
Congress also tends to get involved. That didn’t happen so much in 2024. Perhaps Capitol Hill lawmakers were saving up for this year’s coming tax battles over expiring Tax Cuts and Jobs Act individual tax provisions.
Then we have state taxes. There usually are changes that affect every U.S. resident, even in the few states that don’t impose personal income taxes.
The bottom line is that while we all were recovering from New Year’s Eve celebrations, some new or revised state tax laws took effect on Jan. 1.
NH joins no-individual-income-taxes-at-all club: This New Year, we welcome a no-tax state.
New Hampshire’s interest and dividends tax was officially repealed, per the Granite State’s revenue department website, for taxable periods beginning after December 31, 2024.
That makes New Hampshire the eighth state to not tax any of its individual residents’ earnings. The others are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.
You've probably seen some lists saying there now are nine no-tax states. But I’m not totally counting Washington state. While the Evergreen State doesn’t have an income tax on earned income, in 2022 it started collecting a 7 percent capital gains tax on its wealthier residents.
Good tax news for other state residents: In the majority of remaining states with broader individual income taxes, 2025 brings some good news. That includes relatively happier taxpayers this year in, among other states, Iowa, Louisiana, Indiana, and Mississippi
The Hawkeye State moves from its graduated-rate tax system that has a top levy of 5.7 percent to a flat 3.8 percent income tax rate for Iowa taxpayers.
Louisiana took a similar route, going from progressive individual income tax rates to a single flat rate of 3 percent on Jan. 1. Pelican State filers also get a larger $12,500 standard deduction that is indexed to inflation.
Hoosiers already paid a flat income tax rate, but this year Indiana filers will see it drop a smidge to 3 percent from the prior 3.05 percent.
Mississippi’s flat individual income tax rate also is a bit lower this year. Magnolia State filers will pay 4.4 percent, down from 4.7 percent in 2024.
Those highlights lead to this weekend’s first Saturday Shout Outs of 2025, linked below.
- State Tax Changes Taking Effect January 1, 2025 — The Tax Foundation, a Washington, D.C.-based tax policy organization, notes that 39 states begin 2025 with notable tax changes, including nine states cutting individual income taxes (two of them implementing flat taxes), three states cutting corporate income taxes, and two states adopting new first-year expensing provisions.
- States Announce Major 2025 Tax Changes: What It Means for Your Money — The state tax changes taking effect this year, ranging from income tax cuts to property tax and rent tax relief and gas tax increases, vary considerably, but will impact wallets nationwide, and affect everything from take-home pay to daily expenses, notes Kelley R. Taylor in Kiplinger Personal Finance magazine.
Remember, these changes are effective Jan. 1, 2025. In most cases, that means they will apply to taxes this year and filings due in 2026.
The prior 2024 tax laws that were changed generally apply to state returns that are due this year for income made in the just-ended year.
But generally apply isn’t totally apply.
So, check with your state’s tax department and/or tax adviser to make sure you know the tax laws for your 2024 state filings, as well as what you need to do this year to take advantage of new 2025 tax laws in your state.
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