162, enacted in April 2022 and beginning in 2023, Alabama will exempt the first $6,000 of otherwise taxable retirement income for those 65 or older. Beginning in 2024, businesses with a liability of $100 or less will no longer be required to remit a business privilege tax payment. Starting in 2023, the minimum tax owed will decrease from $100 to $50. Under current law, Alabama’s business privilege tax has a minimum payment of $100 per year, but that minimum will phase out as a result of H.B. Subscribe Alabama Tax Changes Effective January 1, 2023 Subscribe to get insights from our trusted experts delivered straight to your inbox. Stay informed on the tax policies impacting you. These include, but are not limited to, annual adjustments to income tax brackets, standard deductions, and personal exemptions automatic formula-based changes to unemployment insurance taxes changes in interest rates on taxes owed administrative changes and changes to tax credits and other narrow-based taxes or tax provisions. In addition to the notable tax changes mentioned below, many states have routine or less notable tax changes taking effect that are not mentioned here. These and other tax changes taking effect on January 1 are detailed below. One state, New Jersey, will increase its excise tax on recreational marijuana. Seven states-Connecticut, Florida, Illinois, Michigan, New York, North Carolina, and Utah-will see gas taxes increase on January 1, either due to inflation indexing, automatic adjustments tied to the average price of fuel, or the expiration of gas tax holidays. One state, Missouri, has a sales tax economic nexus statute taking effect. One state, Kentucky, will newly apply its sales tax to select services to help pay for individual income tax rate reductions. Several states will implement other notable new sales tax exemptions, with Colorado and Iowa newly exempting diapers and menstrual products and Virginia exempting certain essential hygiene products, including menstrual products. Virginia will newly exempt groceries from its state sales tax base, while Kansas will begin phasing in a state sales tax exemption for groceries by applying a preferential rate. Two states, Louisiana and North Carolina, will make their capital stock taxes less burdensome. One state, Vermont, will repeal its throwback rule. One state, Oklahoma, will offer permanent 100 percent bonus depreciation ( full expensing) despite the federal government’s phasedown to 80 percent bonus depreciation under Section 168(k). Corporate Income Tax and Other Business Tax Changesįive states-Arkansas, Iowa, Nebraska, New Hampshire, and Pennsylvania-have corporate income tax rate reductions taking effect. Two states, Hawaii and Illinois, will expand their earned income tax credits (EITCs). Massachusetts’s individual income tax will convert from a flat to a graduated-rate tax with a new rate of 9 percent on income exceeding $1 million.įive states-Alabama, Delaware, Iowa, Rhode Island, and Nebraska-are newly exempting all or a portion of retirement income or military pension income from income taxation. One state, Massachusetts, has an income tax rate increase taking effect. Three of these states-Arizona, Idaho, and Mississippi-are converting from graduated-rate income tax structures to flat tax structures on New Year’s Day. Individual Income Tax ChangesĮleven states have individual income tax rate reductions taking effect on January 1: Arizona, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nebraska, New Hampshire (interest and dividends income only), New York, and North Carolina. 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. On January 1, 2023, thirty-eight states have noteworthy tax changes taking effect. Most state tax changes take effect at the beginning of the calendar year (January 1) or at the beginning of the fiscal year (July 1 for most states).
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