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Changes in State Taxes Effective in January

Changes in State Taxes Effective in January

With everyone bracing themselves for big changes in national taxes being ushered in with the Biden administration, a new report from the Tax Foundation reminds us that many states had changes in their tax codes that began in the new year.  In fact, 26 states and the District of Columbia had notable tax changes at the beginning of 2021 – many of which were directly adopted by voters in this past November’s election.

“Because most states’ legislative sessions were cut short in 2020 due to the COVID-19 pandemic, fewer tax changes were adopted in 2020 than in a typical year. As such, most of the tax changes highlighted in this paper are the result of laws that were adopted prior to 2020 but that have January 2021 effective dates. Among the handful of tax changes that were adopted in 2020, many were adopted directly by voters on their November 2020 ballots.”

Some key findings:

  • Arkansas and Iowa reduced their corporate income tax rates and made other substantive changes to their corporate income tax base.
  • Arizona & New Mexico increased their top marginal individual income tax rates by adding another bracket.
  • Arkansas reduced its top marginal individual income tax rate by eliminating the top income tax bracket.
  • Tennessee joins seven other states that do not levy any individual income tax. The Hall Tax, which previously taxed interest and dividend income but not wage income, has been completely phased out.
  • Arizona and Illinois made changes to their economic nexus laws governing sales and use tax collection requirements for remote sellers.
  • Connecticut, Vermont, and the District of Columbia will see adjustments to their estate tax exemptions and/or rates this year.
  • Arizona, Montana, and New Jersey recently legalized recreational marijuana and set up a preliminary tax structure for when legal in-state sales begin.
  • North Carolina took legislative action to prevent an automatic rate reduction to its motor fuel tax at the beginning of the year.
  • California, Colorado, and New Jersey had significant retroactive tax changes take effect in 2020 that are worth being aware of as the new year begins.

Click here to read the full report at the Tax Foundation.

 

The post Changes in State Taxes Effective in January appeared first on Real Estate Investing Today.

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