Federal tax reform is on the minds and lips of everyone since its signing in late December, but state tax laws have changed as well, in effect January 1, 2018, and are just as significant to tax season, although the reforms will largely adjust your 2019 filing. Read below to find out what updates your state has made, from west to east.
Hawaii: The state has reimposed its once-temporary income tax rates, which reinstates three brackets and raising the top marginal rate to 11% from 8.25. Hawaii also adopted the nonrefundable income tax credit at 20% of the value of the federal credit.
New Mexico: Corporate tax rates fall to 5.9 from 6.2, another phase of reductions since 2013.
Mississippi: The state is in the process of phasing out the 3% income tax rate, and this year, is exempting the first $1,000 of income. The tax bracket will be removed entirely by 2022. For franchise tax, the first $100,000 of capital value is exempt, and this tax will be phased out by 2028.
Tennessee: Instead of an income tax, the state has imposed a Hall Income tax on interest and dividend income, but this year, the rate is dropping from 4 to 3 percent, and will eventually fall out by 2021.
District of Columbia: The state has increased the individual standard tax deduction and personal exemption, as well as slightly reducing the corporate franchise rate by .5% and raising the estate tax threshold.
Connecticut: An extension of changes in 2015, business surtax is dropping to 10% from 20; with the standard corporate rate, that brings the top marginal rate to 8.25% instead of 9.
Delaware: The estate tax has been repealed, largely because the state was losing more in income tax than gaining in estate tax, considering many residents’ decision to move to Florida or other more tax-friendly states.
New Jersey: A repeal of the estate tax was enacted by Gov Chris Christie, but the new Gov Phil Murphy may want to restore it to take effect 2019.
New York: In slowly repealing the franchise tax, the rate is now under 1%, with repeal scheduled for 2021.
Statewide reform is expected to continue to be reworked as political climates shift and the effects of the federal tax reform are felt. With federal and your states’ tax changes above, it’s a good time to consult your tax professional to understand how your 2018 return will be affected, as well as future filings.
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