In 2024, a series of substantial state tax reforms will impact American taxpayers across the country. The changes, including gas and food tax adjustments and new tax credits, have significant implications for all Americans.
Gas Tax Adjustments
In Oregon, the state’s gas tax will increase to 40 cents per gallon, a move keeping it within the top ten highest gas taxes nationally.
Meanwhile, Utah’s tax rose to 36.5 cents. Pennsylvania, on the other hand, reduced its gas tax for the first time in five years.
Grocery Tax Cuts in Kansas
Kansas has made headlines with its phased reduction of the grocery tax. Now at 2%, the state is aiming to eliminate the tax completely by 2025.
As part of the “Axe the Food Tax” initiative, Kansas hopes to ease financial pressures on its residents, saving families money every month.
Florida’s Tax-Free Shopping Spree
Starting off 2024 with a back-to-school sales tax holiday, Florida gave shoppers a reprieve, allowing residents to secure tax-free purchases on numerous items.
The move, aimed at supporting families and stimulating economic activity, is one of the more novel approaches to state taxation.
Property Tax Relief Efforts
Pennsylvania and Texas have taken steps to provide property tax relief to their residents.
Pennsylvania increased its rent/property tax rebate, while Texas significantly raised its homestead exemption to ease the tax burden on homeowners.
Enhanced Tax Credits
Maine, Colorado, Connecticut, and Massachusetts have expanded their tax credits, offering more substantial financial benefits to qualifying individuals and families.
These adjustments, which include bump-ups in the Earned Income Tax Credits and dependent child tax credits, aim to support lower-income taxpayers.
Income Tax Reductions
Several states have introduced tax cuts, with Georgia adopting a flat tax rate and others like Kentucky, North Carolina, and Ohio reducing their rates.
These changes reflect a broader trend towards lowering the tax load on residents.
Overtime Pay Tax Exemption in Alabama
Alabama stands out for its exemption of overtime pay from state income tax, a policy aimed at supporting hardworking residents.
This exemption, unique among states, is another innovative approach to stimulating the economy.
Electric Vehicle Fees
In line with a national trend, Kentucky and Tennessee have adjusted their electric vehicle registration fees, contributing to infrastructure funding. These changes impact EVs, hybrids, and electric motorcycles.
While the government’s main federal EV tax credit program concluded at the start of 2024, some incentives are still available through dealerships at the point of purchase for new EVs.
Tobacco and E-Cigarette Taxes
Hawaii and Maine have taken steps to curb tobacco use through taxation. Maine now has a 43% on tobacco products, while Hawaii has imposed a significant 70% tax on electronic cigarettes.
Hawaii Governor Josh Green noted that the use of tax policy as a tool for public health has proven effective.
Investment and Dividend Tax Changes
Minnesota and New Hampshire have revised their taxes on investment income. In Minnesota, certain investment incomes over $1 million now incur a 1% tax.
In contrast, New Hampshire is gradually eliminating its tax on interest and dividend income. In 2024, it was lowered to 3%, putting it on track to be abolished entirely by 2025.
Wins and Losses
The introduction of new taxes, tax credits, deductions, and fees in various states presents a range of opportunities and obligations for taxpayers.
The Impact on Taxpayers
Given the widespread ramifications of these changes, taxpayers may want to review their financial plans and tax strategies thoroughly. Or at least engage with their accountants on the matters.
Preparation for Tax Time
As tax season approaches, taxpayers should gather relevant documents and seek advice if needed, ensuring they are well-positioned to address their state tax obligations and leverage any possible benefits.
A Look Ahead
Looking forward, the evolving state tax environment will continue to influence financial planning. Taxpayers who stay informed and adapt to these changes can better manage their tax burdens and capitalize on potential savings.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
