2 NY counties get winter storm disaster tax relief
Time to track your 2023 tax deductible business miles

State tax law 2023 changes, outlook for more

Image by Gerd Altmann from Pixabay

Most states operate on a fiscal year that runs from July 1 to June 30. That's why we see some new laws take effect each summer across the United States.

However, those states also make the effective date for other changes the first of the year. It's easier for us residents, who operate on a January to December calendar, to accept that timetable.

That's especially true of tax laws, since most states also tend to follow the Internal Revenue Service calendar.

New tax laws effective New Year's Day: This Jan. 1, notes the Tax Foundation, 38 states implemented noteworthy tax changes.

"Most, of these changes represent net tax reductions, the result of an unprecedented wave of rate reductions and other tax cuts in the past two years as states respond to burgeoning revenues, greater tax competition in an era of enhanced mobility, and the impact of high inflation on residents," write Tax Foundation staff Katherine Loughead, Janelle Fritts, Timothy Vermeer, and Adam Hoffer at the Washington, D.C.-based tax policy nonprofit's website.

The notable New Year state tax changes affecting individuals include:

  • reduced individual income tax rates in 11 states (Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire, New York, and North Carolina);
  • exemption of all or a portion of retirement income or military pension income from income taxation in five states (Alabama, Delaware, Iowa, Rhode Island, and Nebraska); and
  • expansion of the state Earned Income Tax Credit in two states (Hawaii and Illinois).

You can find more on these and other individual tax changes, as well as state tax code changes in the corporate, sales, excise and other tax areas that took effect New Year's Day in the Tax Foundation's review and analysis. It's titled, what else, State Tax Changes Taking Effect January 1, 2023.

It's also one of this weekend's Saturday Shout Outs. It's the start of the seventh year of this feature here on the ol' blog. Something about flying time and tax fun. 😉

State tax 2023 preview: The other shout out goes to State Tax Policy Trends to Watch in 2023. In this Tax Notes Talk podcast (you can listen to it or read the transcript), host David D. Stewart shares a conversation between his colleague Paul Jones and Valerie Dickerson of Deloitte Tax LLP about the show's state tax policy trends headline.

Among the topics is how states deal with passthrough entities, especially the workarounds for these entities adopted by around half of the states to the state and local tax (SALT) deduction cap from the federal Tax Cuts and Jobs Act.

Spoiler but not really a spoiler, Dickerson says "taxpayers are going to find themselves in the position of needing guidance. True to state and local taxation, there's some uniformity, but not true uniformity in how many of these were adopted. Taxpayers that might be in a situation paying in multiple jurisdictions, they're going to be looking for some continuity, which is always a desire, in order to make the administrative processes more efficient."

Again, as is the Saturday Shout Out goal, I'll leave you to read and/or listen to both these items at you leisure.

I hope they help make your first weekend of 2023 more informed and enjoyable.

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