State Tax Changes Taking Effect January 1, 2024
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State Tax Changes Taking Effect January 1, 2024
Thirty-four states are implementing significant tax changes for the new year, with 17 reducing individual or corporate income taxes, and some doing both. State tax adjustments typically take effect at the beginning of the calendar year (January 1) or the fiscal year (July 1 for most states). Major tax rate changes are usually applied from January 1, either prospectively or retroactively under new legislation.
Recent years have witnessed substantial tax reforms, including rate reductions and relief measures, as states navigated the post-pandemic landscape with revenue surpluses and inflation challenges. While the future trajectory is uncertain, evidence from the past three years indicates that many states recognize the importance of maintaining a stable, pro-growth, and competitive tax code.
Summary of changes
Individual Income Tax Changes
State Income Tax Rate Changes (Top Marginal Rates, 2023 and 2024)
| State | Personal Income Taxes | Corporate Income Taxes | ||
| 2023 | 2024 | 2023 | 2024 | |
| Arkansas | 4.90% | 4.40% | 5.30% | 4.80% |
| California | 13.30% | 14.40% | ||
| Georgia | 5.75% | 5.49% | ||
| Indiana | 3.15% | 3.05% | ||
| Iowa | 6% | 5.70% | 8.40% | 7.10% |
| Kentucky | 4.50% | 4.00% | ||
| Kansas | 7% | 6.50% | ||
| Michigan | 4.05% | 4.25% | ||
| Mississippi | 5% | 4.70% | ||
| Missouri | 4.95% | 4.80% | ||
| Montana | 6.75% | 5.90% | ||
| Nebraska | 6.64% | 5.84% | 7.25% | 5.84% |
| New Hampshire* | 4.00% | 3.00% | ||
| New Jersey | 11.50% | 9% | ||
| North Carolina | 4.75% | 4.50% | ||
| Ohio | 3.99% | 3.50% | ||
| Pennsylvania | 8.99% | 8.49% | ||
| South Carolina | 6.50% | 6.40% | ||
* Tax is on interest and dividend income only.
Note: Connecticut reduced rates for certain brackets but did not reduce the top marginal rate.
Sources: State statutes; Bloomberg Tax; Tax Foundation research.
Corporate Business Tax and Other Business Tax Changes
State Income Tax Rate Changes (Top Marginal Rates, 2023 and 2024)
| State | Personal Income Taxes | Corporate Income Taxes | ||
| 2023 | 2024 | 2023 | 2024 | |
| Arkansas | 4.90% | 4.40% | 5.30% | 4.80% |
| California | 13.30% | 14.40% | ||
| Georgia | 5.75% | 5.49% | ||
| Indiana | 3.15% | 3.05% | ||
| Iowa | 6% | 5.70% | 8.40% | 7.10% |
| Kentucky | 4.50% | 4.00% | ||
| Kansas | 7% | 6.50% | ||
| Michigan | 4.05% | 4.25% | ||
| Mississippi | 5% | 4.70% | ||
| Missouri | 4.95% | 4.80% | ||
| Montana | 6.75% | 5.90% | ||
| Nebraska | 6.64% | 5.84% | 7.25% | 5.84% |
| New Hampshire* | 4.00% | 3.00% | ||
| New Jersey | 11.50% | 9% | ||
| North Carolina | 4.75% | 4.50% | ||
| Ohio | 3.99% | 3.50% | ||
| Pennsylvania | 8.99% | 8.49% | ||
| South Carolina | 6.50% | 6.40% | ||
* Tax is on interest and dividend income only.
Note: Connecticut reduced rates for certain brackets but did not reduce the top marginal rate.
Sources: State statutes; Bloomberg Tax; Tax Foundation research.
Sales and Use Tax Changes
Property Tax Changes
Excise Tax Changes
Other Tax Changes
Tax Changes by State
Alabama
Effective January 1, 2024, Alabama’s tax changes (Act 2023-421, H.B. 217) exclude overtime wages from full-time employees’ gross income. Overtime pay, earned for hours exceeding 40 per week, is temporarily excluded until June 30, 2025. Employers must submit a one-time report on overtime wages in 2023 and, from 2024 onward, provide quarterly or monthly reports to the Department of Revenue with the same information.
Arkansas
Effective January 1, 2024, Arkansas will witness further tax changes following adjustments on January 1, 2023. The state’s top marginal corporate tax rate, initially reduced from 5.9 percent to 5.3 percent in 2023, will see an additional reduction to 4.8 percent in 2024. Moreover, according to H.B. 1045, the state’s throwback rule will undergo a phased reduction starting in 2024, with full phaseout expected by 2030.
In 2022, the top marginal individual income tax rate was lowered to 4.9 percent, and this rate is set for an additional reduction to 4.4 percent starting in 2024. House Bill 1430, Act 196, introduces changes to the state’s unemployment insurance tax, with a $7,000 wage base if the unemployment trust fund balance equals or exceeds $600 million. Additionally, the new unemployment insurance tax rate will be reduced to 1.9 percent, down from the previous 2.9 percent.
California
California finances its disability insurance program with a payroll tax of 1.1 percent on wages up to $153,164 in 2023. Starting in 2024, the wage ceiling will be eliminated, resulting in all wage income being subject to the payroll tax. Consequently, the top marginal individual income tax rate on wage income (excluding other income) in the state will increase to 14.4 percent.
Colorado
Effective January 1, 2024, Colorado is implementing tax changes as outlined in HB23B-1002. The state’s earned income tax credit (EITC) will see an increase from 25 percent to 50 percent of the federal credit for the fiscal year 2023-2024.
In 2020, under Senate Bill 20-207, Colorado pledged to raise the state’s unemployment insurance wage base to $30,600 by 2026. However, for the year 2024, the legislation sets the wage base at $23,800.
Connecticut
Effective January 1, 2024, Connecticut is implementing notable tax changes. Initially introduced in 2018, the pass-through entity tax (PTET) subjected pass-through entities to entity-level taxation, providing owners with reduced federal taxable income. However, starting in 2024, this system will become elective, allowing taxpayers the flexibility to choose when to opt for the PTET. Additionally, only one base will be available for computing the tax, and the carryforward provision for net operating losses under PTET has been eliminated.
The state is also offering relief to individual taxpayers in 2024 by reducing the 3 percent bracket to 2 percent and the 5 percent bracket to 4.5 percent. This relief is capped for individuals earning $150,000 or more, and married couples earning $300,000 or more. Other tax rates, including the top marginal rate, remain unchanged. Furthermore, the biennium budget raises the Earned Income Tax Credit (EITC) to 40 percent of the federal credit, up from 30.5 percent. Seniors will benefit from expanded exemptions for certain pensions and annuity earnings.
In 2021, House Bill 6633 increased the 2024 unemployment insurance tax wage base from $15,000 to $25,000, with subsequent indexing for inflation after 2024.
Delaware
Effective January 1, 2024, Delaware will experience tax changes outlined in House Bill 236. This legislation extends the one-year special unemployment insurance tax rates for an additional year, maintaining rates ranging from 0.1 percent to 5.4 percent for 2024.
Georgia
Effective January 1, 2024, Georgia is undergoing tax changes, aligning with a trend seen in several states towards adopting a flat tax structure. The Peach State will consolidate its six individual income tax brackets into one, set at a rate of 5.49 percent, as per legislation signed by Governor Kemp in 2022. There is potential for this rate to decrease by 0.1 percent annually until it reaches 4.99 percent, with the governor and state lawmakers indicating a willingness to further reduce the 2024 rate to 5.39 percent, achieving the intended target by 2028, one year ahead of schedule.
Hawaii
Hawaii will levy a 70 percent tax on the wholesale price of e-cigarettes, e-liquid, and other electronic smoking devices.
Indiana
House Bill 1001 expedites the state’s previously approved rate reductions by decreasing the individual income tax rate from 3.15 percent to 3.05 percent in 2024. The legislation also eliminated associated tax triggers and outlined additional rate reductions to 3.0 percent in 2025, 2.95 percent in 2026, and 2.9 percent in 2027 and subsequent years.
Lowa
Iowa persists in its pursuit of tax relief. According to the contingent flat tax plan for corporate taxpayers, the corporate tax rate in 2024 is slated to be 5.5 percent on income under $100,000 and 7.1 percent on income exceeding $100,000.
For individual taxpayers, the state remains on course to establish a flat income tax rate of 3.9 percent by 2026. In 2024, the top marginal tax rate is expected to be 5.7 percent.
Kansas
In 2022, Kansas legislators empowered the Department of Revenue to lower the corporate income tax rate under specific conditions. This adjustment took effect in 2023, as the Secretary of Revenue reduced the corporate income tax rate from 4 percent to 3.5 percent starting January 2024. The surtax rate, applicable to corporate income exceeding $50,000, remains unchanged at 3 percent. Consequently, the overall combined rate decreases from 7 percent to 6.5 percent.
H.B. 2106 extends the gradual reduction of the state’s sales tax on groceries. The rate decreases from 4 percent to 2 percent on January 1, 2024, with a planned elimination of the tax on January 1, 2025.
Kentucky
In February 2023, Kentucky passed House Bill 1, implementing a reduction in the state’s flat income tax rate from 4.5 percent to 4.0 percent, effective in 2024. This formalized a reduction triggered by conditions outlined in 2022 (House Bill 8).
KRS 138.488 introduces a new excise tax on electric vehicle power for charging electric vehicles within the state, set at a rate of $0.03 per kilowatt-hour. Furthermore, the legislation introduces an electric vehicle owner registration fee.
Louisiana
Louisiana legislators have repealed the state’s throwout rule, eliminating the taxation of “nowhere income.” Presently, Maine stands as the sole state retaining this inefficient and non-competitive tax practice.
Before 2024, the Louisiana Department of Revenue mandated taxpayers to use an electronic form, the Parish E-file System, for state and/or local sales tax payments. However, effective January 1, 2024, H.B. 558 (Act 375) designates the Uniform Local Sales Tax Board to oversee this electronic filing system. The system is slated to be available until 2026, after which the law mandates the certification of a new system.
Maine
Presently, the state provides a $300 dependent exemption tax credit. Starting in 2024, as outlined in L.D. 258, this credit will transition to a refundable format.
Furthermore, the updated statute concerning taxes on tobacco products will be enforced, levying a tax equivalent to 43 percent of the cost price on all tobacco products, unless otherwise taxed by a different provision of the statute.
Massachusetts
On October 4, 2023, Governor Healey approved H. 4104, mandating taxpayers to use identical filing statuses on both state and federal income tax returns. This measure was implemented, in part, to curb the avoidance of the state’s 4 percent surtax on incomes exceeding $1 million. In previous years, married taxpayers had the option to file jointly on their federal tax return and individually on the state return, enabling some individuals to evade surtax payments. Additionally, the state enacted a tax reform package, largely retroactive to 2023, featuring a gradual increase in the child and dependent tax credit from $330 to $440 in 2024.
Michigan
In 2015, Michigan amended its Income Tax Act, introducing automatic triggers that would lower the flat individual income tax rate upon meeting specific economic criteria. In 2023, these triggers were activated, reducing the rate to 4.05 percent. However, following a controversial Attorney General opinion deeming this reduction temporary, the rate is set to revert to 4.25 percent in 2024.
Additionally, Michigan will broaden its Earned Income Tax Credit (EITC) from 6 to 30 percent of the federal credit.
Minnesota
Commencing in 2024, Minnesota will impose a 1 percent tax on the net investment income of individuals, estates, and trusts exceeding $1 million in net investment income for the year. Furthermore, effective for political contributions made after January 1, 2024, the state has increased the refund to $75 for single filers and $150 for joint filers.
Mississippi
The state has implemented a singular rate for individual tax purposes applicable to income surpassing $10,000. In 2024, this rate is scheduled for a reduction to 4.7 percent, marking a decrease from the initial rate of 5 percent implemented in 2023.
Missouri
In July 2023, Governor Parson endorsed Senate Bill 190, effectively eliminating the income threshold for deductibility and thereby exempting Social Security payments from state income tax. Consequently, federal Social Security payments will no longer be liable to taxation. Additionally, for the tax year 2024, the top individual income tax rate is slated to decrease to 4.8 percent, down from the previous rate of 4.95 percent.
Montana
In 2021, Montana enacted Senate Bill 399, introducing several changes to the state’s tax code effective in 2024. The legislation streamlined the state’s seven individual income tax brackets into two and lowered the top marginal rate from 6.75 percent to 6.5 percent. Subsequently, in 2023, the legislature further reduced this rate to 5.9 percent. Additionally, individual taxpayers are now mandated to utilize the same filing status for both federal and state tax returns.
Montana will also implement a new tax structure for capital gains income, subjecting it to lower rates than ordinary income. Capital gains will now be taxed at rates of either 3 percent or 4.1 percent.
Nebraska
In recent years, Nebraska has prioritized competitive and pro-growth tax reform. In 2023, the state accelerated previously planned cuts to individual and corporate tax rates, achieving a faster reduction in the top marginal tax rate. Nebraska is moving towards a flat corporate income tax rate of 3.99 percent by 2027, with the top marginal tax rate reduced from 7.25 percent to 5.84 percent on income above $100,000 in 2024. For individual taxpayers, the goal is to reach a 3.99 percent top rate by 2027, and in 2024, the rate will be 5.84 percent, three years earlier than expected.
New Hampshire
Through S.B. 189, legislators in New Hampshire have delinked the state’s tax code from the federal business net interest limitation outlined in IRC § 163(j). This change permits businesses to fully deduct interest expenses in the year they are incurred. Additionally, the state allows taxpayers to deduct any carryforwards of business interest expenses previously disallowed over three years, distributed equally.
The state’s budget (H.B. 2), enacted in June 2023, expedites the phaseout of the tax on interest and dividends income. Instead of the initial plan to eliminate it by 2027, the tax is now set to be eliminated in 2025. In 2024, the rate will be reduced to 3 percent, down from the previous rate of 4 percent.
New Jersey
New Jersey’s business tax surcharge of 2.5 percent on business income exceeding $1 million is scheduled to conclude in 2024. This will result in a reduction of the top marginal corporate tax rate to 9 percent, down from the previous nation-leading top rate of 11.5 percent.
North Carolina
The individual income tax rate for 2024 in the state, as established by Session Law 2023-134, is set at 4.5 percent, down from the previous rate of 4.75 percent. Subsequent reductions in the coming years will be contingent on meeting revenue targets. Additionally, the legislation extends sales and use tax exemptions for commercial aviation fuel and retail sales to professional motorsports teams, which were initially set to expire in 2024.
Ohio
The biennial budget, endorsed in July 2023, streamlines the top two marginal tax rates for individual income into one and establishes the rate at 3.5 percent.
Moreover, reforms to the state’s Commercial Activity Tax (CAT), a gross receipts tax, are slated for implementation. Starting in January, the gross receipts threshold will increase from $1 million to $3 million. If a business entity’s gross receipts fall below this new threshold, they will be exempt from the CAT. Additionally, the CAT annual minimum tax has been eliminated.
Oregon
In 2024, newly established employers in Oregon will encounter an elevated unemployment insurance tax rate, witnessing an increase from 2.1 percent to 2.4 percent for the new employer rate. Furthermore, the wage base has been raised to $52,800, a rise from the previous $50,900.
Effective January 1, 2024, the excise tax on motor fuel is set to escalate from $0.38 to $0.40.
Pennsylvania
In 2024, there will be a reduction in the state’s corporate income tax rate, decreasing to 8.49 percent from the previous 8.99 percent.
Certain homeowners and renters in the Keystone State qualify for the Property/Rent Rebate Program. Starting in 2024, the maximum standard rebate will see an increase to $1,000, up from the prior amount of $650. Moreover, the income limit for each rebate will be raised to $45,000.
Rhode Island
Residents of Rhode Island can anticipate an augmented state Earned Income Tax Credit (EITC), set to be 16 percent of the federal credit. This marks an increase from the most recent rate of 15 percent and a significant growth from the 10 percent rate in place as of 2015.
South Carolina
In 2024, South Carolina is set to decrease its highest individual income tax rate from 6.5 percent to 6.4 percent. There is an additional goal to further reduce this rate to 6 percent, contingent upon meeting specified revenue triggers.
Texas
With the approval of Proposition 4, Texas voters have elevated the homestead exemption from $40,000 to $100,000. Utilizing a mechanism termed “compression,” state funds will be employed to mitigate local property tax rates.
Moreover, the “no tax due” threshold for the state franchise tax is set to double. This implies that a taxable entity with total annual revenue below $2.47 million will be exempt from the franchise tax obligation and the necessity to file a “no tax due report.”
Utah
Utah is implementing an adjustment to the statewide motor fuel excise tax rate, elevating it from $0.345 to $0.365.
Vermont
For the year 2024, the unemployment insurance tax wage base is set to increase to $14,300, reflecting a rise from the previous $13,500.
Wisconsin
Wisconsin has revoked the tangible personal property tax, effective January 1, 2024. While the state had previously exempted most personal property from taxation, the repeal now concludes this exemption process.
Wyoming
In 2024, Wyoming’s unemployment insurance tax wage base is slated to increase to $30,900, marking an elevation from the previous figure of $29,100.
Notable Changes Retroactive to 2023
Several states implemented retroactive tax changes, either effective from January or July of 2023, and sometimes on alternative dates. Most of these changes were covered in our update on tax adjustments effective July 1, 2023, which also highlighted modifications as of that date that retroactively applied to earlier in the year. Additionally, there are several more tax changes enacted in 2023 with effective dates predating 2024.
Colorado
It’s important to note that the provisions of SB23B-001 are applicable only to the 2023 property tax year. However, HB23B-1003, also enacted in the special session, establishes a Property Tax Task Force tasked with studying and recommending, by March 2024, a strategy for achieving permanent and sustainable property tax relief.
Florida
Georgia
Indiana
Additionally, HB 1499, enacted as PL 239, introduces noteworthy property tax adjustments. Firstly, it raises the supplemental homestead deduction, with the standard deduction fixed at $48,000. The supplemental deduction, applicable to the net assessed value after applying the standard deduction, will increase from 35 to 40 percent in 2024. Secondly, the bill imposes a cap on the maximum levy growth quotient at 4 percent in 2024.
Louisiana
Massachusetts
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