As we turn the page to 2024, many Americans are hoping for some Tax Changes in 2024 relief from rising costs and inflation. And for residents in a dozen states, that relief may come in the form of lower taxes.
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This year, a majority of Republican-led states are implementing tax cuts for residents, putting more money in people’s pockets. Let’s take a closer look at where these changes are happening and what they mean for you.
2024 Tax Changes: States Lowering Income Tax Rates:
1. Arkansas:
The top individual income tax rate in Arkansas dropped from 4.9% to 4.4% at the start of January 2024. This accelerates previously planned rate reductions that were originally scheduled to begin in the 2025 tax year.
- Dates:The changes went into effect on January 1, 2024.
- Income thresholds:The top individual income tax rate was reduced from 4.9% to 4.4%. This change applies to all income above $87,600 for single filers and $175,200 for married couples filing jointly.
- Deductions and credits:The changes do not affect any deductions or credits.
- Resources:The Arkansas Department of Finance and Administration has a website with more information about the changes.
Specific examples:
- A single filer with a taxable income of $100,000 would have paid $4,900 in income tax in 2023. In 2024, they would pay $4,400, a savings of $500.
- A married couple filing jointly with taxable income of $200,000 would have paid $9,800 in income tax in 2023. In 2024, they would pay $9,000, a savings of $800.
2. Connecticut:
Connecticut is providing some tax relief to taxpayers this year by cutting its 3% individual income tax bracket to 2% and reducing its 5% bracket to 4.5%. However, these changes do not apply to individuals earning $150,000 or more, or married couples earning $300,000 or more.
Tax changes in 2024
The tax cuts took effect on January 1, 2024.
Income thresholds:
- Reduced 3% rate:Applies to the first $10,000 of taxable income for single filers and the first $20,000 for joint filers. This rate was lowered from 3% to 2%.
- Reduced 5% rate:Applies to the next $40,000 of taxable income for single filers and the next $80,000 for joint filers. This rate was reduced from 5% to 4.5%.
- No change:Higher income brackets retain their existing rates.
Deductions and credits: The tax cuts themselves don’t affect any deductions or credits. However, it’s worth noting that Connecticut also increased the Earned Income Tax Credit (EITC) for low-income earners and expanded exemptions on certain pension and annuity earnings for seniors in 2024.
Resources:
- Connecticut Department of Revenue Services website:https://portal.ct.gov/drs
- Information on the tax cuts:https://portal.ct.gov/Office-of-the-Governor/News/Press-Releases/2023/12-2023/Governor-Lamont-Announces-Income-Tax-Rates-Go-Down-at-the-Start-of-2024
- Information on the EITC increase:https://portal.ct.gov/OPM
- Information on senior pension and annuity exemptions:https://portal.ct.gov/DVA/Pages/Property-Tax-Exemptions
Specific examples:
- A single filer with taxable income of $30,000 would have paid $840 in income tax in 2023. In 2024, they would pay $640, a savings of $200.
- A married couple filing jointly with taxable income of $80,000 would have paid $4,000 in income tax in 2023. In 2024, they would pay $3,320, a savings of $680.
3. Georgia:
Georgia will join several states that have either adopted or are considering a flat tax rate. The Peach State will eliminate its six individual income tax rates in favor of a flat tax rate of 5.49% under legislation signed by Republican Gov. Brian Kemp in 2022.
Tax changes in 2024
Dates: The flat tax rate of 5.49% went into effect on January 1, 2024.
Income thresholds: Georgia no longer has individual income tax brackets. The 5.49% rate applies to all taxable income for everyone.
Deductions and credits: The changes do not affect existing deductions or credits. However, the standard deduction is gradually increasing alongside the decreasing flat tax rate.
Resources:
- Georgia Department of Revenue website:https://dor.georgia.gov/
- Information on the flat tax:https://dor.georgia.gov/tax-tables-georgia-tax-rate-schedule
- Information on standard deduction changes:https://dor.georgia.gov/
Specific examples:
- A single filer with taxable income of $50,000 would have paid $2,450 in income tax in 2023 (6% tax rate based on the previous income bracket). In 2024, they would pay $2,745, an increase of $295 due to the slightly higher flat rate but partially offset by the increased standard deduction.
- A married couple filing jointly with taxable income of $100,000 would have paid $4,900 in income tax in 2023 (6% tax rate based on the previous income bracket). In 2024, they would pay $5,490, an increase of $590 due to the higher flat rate but partially offset by the increased standard deduction.
Additional notes:
- The flat tax rate is scheduled to decrease gradually each year by 0.1%, until it reaches 4.99% in 2029.
- The standard deduction increase is also linked to state revenue growth. If revenue falls short of certain targets, the rate reductions and standard deduction increases might be delayed.
4. Indiana:
Indiana will accelerate its previously enacted tax rate cuts in 2024, trimming the individual income tax rate from 3.15% to 3.05%.
Tax changes in 2024
Date: The tax rate reduction went into effect on January 1, 2024.
Reduced Rate: The individual income tax rate in Indiana was accelerated, decreasing from 3.15% to 3.05%.
Other changes:
- No changes to income thresholds or brackets.
- Existing deductions and credits remain unaltered.
Resources:
- Indiana Department of Revenue website:https://www.in.gov/dor/
- Information on the tax cut:https://www.in.gov/dor/individual-income-taxes/
Specific examples:
- A single filer with taxable income of $50,000 would have paid $1,575 in income tax in 2023. In 2024, they would pay $1,525, a savings of $50.
- A married couple filing jointly with taxable income of $100,000 would have paid $3,150 in income tax in 2023. In 2024, they would pay $3,050, a savings of $100.
Additional notes:
- This cut follows previous reductions in 2022 and 2021, and further accelerates the state’s plan to reach a 3% flat tax rate by 2025.
- Some county income tax rates in Indiana increased in 2024. Check with your specific county for details.
5.Iowa:
Iowa is slowly moving toward a planned flat tax rate of 3.9%, which it intends to hit in 2026, as part of a $1.9 billion tax cut signed by Republican Gov. Kim Reynolds in 2022. In 2024, it will reduce the top marginal tax rate to 5.7%.
Tax changes in 2024
Dates: The changes took effect on January 1, 2024.
Reduced Rate: The top marginal individual income tax rate in Iowa decreased from 5.73% to 5.70%. This is a gradual step towards the state’s goal of a 3.9% flat tax rate by 2026.
Income thresholds:
- Three brackets exist for individual filers:
- 0.33% for income up to $41,573.
- 3.33% for income between $41,574 and $181,563.
- 5.70% for income exceeding $181,563.
- Similar brackets apply for married couples filing jointly:
- 0.33% for income up to $83,146.
- 3.33% for income between $83,147 and $363,126.
- 5.70% for income exceeding $363,126.
No change: Existing deductions and credits remain unaffected.
Resources:
- Iowa Department of Revenue website:https://tax.iowa.gov/:https://tax.iowa.gov/
- Information on the tax changes:https://tax.iowa.gov/idr-announces-2024-individual-income-tax-brackets-and-interest-rates:https://tax.iowa.gov/idr-announces-2024-individual-income-tax-brackets-and-interest-rates
Specific examples:
- A single filer with taxable income of $50,000 would have paid $1,665 in income tax in 2023. In 2024, they would pay $1,650, a savings of $15.
- A married couple filing jointly with taxable income of $100,000 would have paid $3,330 in income tax in 2023. In 2024, they would pay $3,300, a savings of $30.
Additional notes:
- Iowa’s tax law requires the Department of Revenue to adjust the tax brackets annually based on changes in the federal personal income tax exemption.
- If the state’s revenue meets certain benchmarks, future annual reductions in the top marginal rate will continue until the 3.9% flat rate is reached.
6. Mississippi:
Mississippi residents with income exceeding $10,000 will pay a single tax rate of 4.7% this year, down from the initial rate of 5% that was established in 2023. The tax rate will eventually drop to 4.4% in 2025 and 4% in 2026.
Tax changes in 2024
Dates: The single tax rate change took effect on January 1, 2024.
Reduced Rate:
- A single tax rate of 4.7% now applies to all income exceeding $10,000 for both single and married taxpayers filing jointly. This represents a reduction from the initial 5% rate implemented in 2023.
Income thresholds:
- There are no longer separate tax brackets for different income levels. The 4.7% rate applies to all income above $10,000.
No change: Existing deductions and credits remain unaffected by the rate change.
Resources:
- Mississippi Department of Revenue website:https://www.dor.ms.gov/individual
- Information on the tax changes:https://www.dor.ms.gov/individual
Specific examples:
- A single filer with taxable income of $50,000 would have paid $2,500 in income tax in 2023. In 2024, they would pay $2,350, a savings of $150.
- A married couple filing jointly with taxable income of $100,000 would have paid $5,000 in income tax in 2023. In 2024, they would pay $4,700, a savings of $300.
Additional notes:
- The single tax rate is phased to decrease further in coming years:
- 4.4% in 2025
- 4% in 2026
- Governor Reeves has proposed further tax cuts, including eliminating the income tax altogether, but these proposals face legislative scrutiny.
I hope this information is helpful! Please let me know if you have any other questions about the income tax changes in Mississippi.
7. Montana:
Montana approved a major tax overhaul in 2021, combining its seven tax brackets into two. Beginning in 2024, the top marginal rate for Montana residents will fall to 5.9% in 2024, down from 6.75% the previous year. The lower rate will drop to 4.7% for the 2024 filing year.
Tax changes in 2024
Overview:
- Reduced rates:
- Top marginal rate decreased from 6.75% in 2023 to 5.9% in 2024.
- Lower rate decreased from 4.75% in 2023 to 4.7% in 2024.
- Simplified brackets:
- Seven brackets combined into two.
- Higher rate applies to income exceeding $20,500 for single filers,$30,750 for heads of household,and $41,000 for married couples filing jointly and qualifying surviving spouses.
- Lower rate applies to income below the thresholds mentioned above.
Additional details and resources:
- The changes apply to income earned in 2023 and filed in 2024.
- Military retirement income exemption was also introduced for working military residents who became Montana residents after June 30,2023,or began receiving retirement income after becoming residents.
- For more information on specific rates,thresholds,and other details,you can visit the Montana Department of Revenue website:https://mtrevenue.gov/
- Check out the “Major Updates to Montana’s Tax System Beginning in Tax Year 2024” page for comprehensive information:https://mtrevenue.gov/major-updates-to-montanas-tax-system-beginning-in-tax-year-2024-montana-tax-news-you-can-use/
8. Nebraska:
Nebraska will reduce its top marginal tax rate from 7.25% to 5.84% in 2024 for all income above $100,000. The state is working to reduce the top rate to 3.99% by 2027.
Nebraska income tax changes in 2024:
- Reduced top marginal rate:
- Decreased from 7.25% in 2023 to 5.84% for income exceeding $100,000 for both single filers and married couples filing jointly.
- No change to brackets:
- Multiple tax brackets still exist for income below $100,000,but the rates within these brackets haven’t changed.
- Part of a multi-year plan:
- Aims to gradually reduce the top marginal rate to 3.99% by 2027.
- Standard deduction increase:
- Slightly increased in 2024,providing additional tax relief to some taxpayers.
Additional details and resources:
- The changes apply to income earned in 2023 and filed in 2024.
- Visit the Nebraska Department of Revenue website for detailed information and tax tables:https://revenue.nebraska.gov/
- Check out the “Circular EN:Nebraska Income Tax Withholding – Wages,Pensions and Annuities,and Gambling” page for specific details:https://revenue.nebraska.gov/businesses/circular-en-nebraska-income-tax-withholding-wages-pensions-and-annuities-and-gambling
Reduced Rate:
- The top marginal individual income tax rate in Nebraska was reduced from 7.25% to 5.84% for income exceeding $100,000. This applies to both single filers and married couples filing jointly.
Income thresholds:
- Nebraska still uses multiple tax brackets for income below $100,000, though the specific rates within these brackets haven’t changed for 2024.
Additional notes:
- This is the first step in a multi-year plan to gradually reduce the top marginal rate to 3.99% by 2027.
- The standard deduction is also increasing slightly in 2024, providing additional tax relief to some taxpayers.
Resources:
- Nebraska Department of Revenue website:https://revenue.nebraska.gov/
- Information on the tax changes:https://revenue.nebraska.gov/businesses/circular-en-nebraska-income-tax-withholding-wages-pensions-and-annuities-and-gambling
Specific examples:
- A single filer with taxable income of $120,000 would have paid $8,700 in income tax in 2023. In 2024, they would pay $6,666, a savings of $2,034.
- A married couple filing jointly with taxable income of $150,000 would have paid $10,875 in income tax in 2023. In 2024, they would pay $8,250, a savings of $2,625.
Additional notes:
- Be sure to review the Nebraska Department of Revenue website for the most up-to-date information and to find detailed tax tables and instructions.
- If you have complex tax circ*mstances, it’s always advisable to consult with a tax professional to ensure you’re taking advantage of all available deductions and credits.
I hope this information is helpful! Please let me know if you have any other questions about the income tax changes in Nebraska.
9. New Hampshire:
Unlike the other states which are reducing income taxes, New Hampshire is phasing out a tax on interest and dividends income. The tax rate – which will be lowered to 3% in 2024, down from 4% the previous year – is set to be eliminated in 2025.
New Hampshire: Tax changes in 2024
Dates:
- The tax reduction was implemented in two steps:
- The rate dropped from 4% to 3% on January 1, 2023.
- The tax will becompletely eliminatedon January 1, 2025.
Income thresholds:
- The tax only applies to interest and dividends income, not wages or other types of income.
- There are no income thresholds for this tax. It applies to all taxpayers who receive interest and dividends income, regardless of their total income level.
No change: Existing deductions and credits remain unaffected by the change in the interest and dividends tax.
Resources:
- New Hampshire Department of Revenue Administration website:https://www.revenue.nh.gov/
- Information on the phasing out of the interest and dividends tax:https://newhampshirebulletin.com/2023/03/30/repeal-of-interest-and-dividends-tax-disproportionately-benefits-wealthy-nh-households/
Specific examples:
- A taxpayer with $10,000 in interest and dividends income would have paid $400 in tax in 2023. In 2024, they would pay $300, a savings of $100.
- A taxpayer with $50,000 in interest and dividends income would have paid $2,000 in tax in 2023. In 2024, they would pay $1,500, a savings of $500.
Additional notes:
- This tax change primarily benefits retirees and investors who earn income from interest and dividends.
- Some fiscal analysts warn that eliminating the tax may lead to revenue shortfalls for the state in the long run.
10 North Carolina:
The flat income tax rate in North Carolina will fall to 4.5% in 2024, down from 4.75% the previous year.
Tax changes in 2024
North Carolina joined the trend of states reducing income taxes in 2024, implementing a flat rate reduction for individual filers. Here’s what you need to know:
Dates: The changes went into effect on January 1, 2024.
Reduced Rate: The flat individual income tax rate dropped from 4.75% to 4.5%. This applies to all taxable income for both single filers and married couples filing jointly.
Income thresholds: North Carolina no longer has separate income tax brackets. The 4.5% rate applies to all taxable income for everyone.
No change: Existing deductions and credits remain unaffected by the changes.
Resources:
- North Carolina Department of Revenue website:https://www.ncdor.gov/:https://www.ncdor.gov/
- Information on the tax changes:https://www.ncdor.gov/fiscal-year-2023-2024:https://www.ncdor.gov/fiscal-year-2023-2024
Specific examples:
- A single filer with taxable income of $50,000 would have paid $2,375 in income tax in 2023. In 2024, they would pay $2,250, a savings of $125.
- A married couple filing jointly with taxable income of $100,000 would have paid $4,750 in income tax in 2023. In 2024, they would pay $4,500, a savings of $250.
Additional notes:
- The state is planning further reductions in the future. The current plan is to decrease the flat rate by half a percentage point each year until it reaches 3.99% in 2026.
- Some county income tax rates in North Carolina also changed in 2024. Check with your specific county for details.
11. Ohio:
In legislation passed last year, Ohio consolidated the top two marginal tax rates for individual income into one and set the rate at 3.5% in 2024.
Tax changes in 2024
Ohio’s income tax changes for 2024 are a bit more complex compared to some other states, involving both reductions and adjustments to specific taxes:
Changes to Individual Income Tax:
- Reduced Top Bracket:The top individual income tax rate was consolidated from two brackets (4.79% and 5.29%) into a single3.5% ratefor all income exceeding $87,600 for single filers and $175,200 for married couples filing jointly.This applies to taxable income earned in 2023 and reported in 2024.
Changes to Commercial Activity Tax (CAT):
- Increased Exemption Threshold:The annual exemption threshold for the CAT increased to$3 millionfrom $1 million for 2024 and beyond.This means businesses with taxable gross receipts under $3 million won’t be subject to the CAT.
- Elimination of Annual Minimum Tax:The annual minimum tax of $150 for CAT filers was eliminated for tax periods starting on or after January 1,2024.
Additional notes:
- No changes were made to other income tax brackets or deductions in 2024.
- There were also changes to municipal income tax filing deadlines and exemptions for individuals under 18.
Here are some helpful resources for further information:
- Ohio Department of Taxation website:https://tax.ohio.gov/
- Information on individual income tax changes:https://tax.ohio.gov/ohio_individual/individual.aspx
- Information on CAT changes:https://tax.ohio.gov/business/ohio-business-taxes/commercial-activities/changes_to_ohios_commercial_activity_tax
12. South Carolina:
South Carolina will reduce its top individual income tax rate from 6.5% to 6.4% in 2024. The Palmetto State aims to reduce the rate further to 6%.
Tax changes in 2024
Effective Date: The reduction in the top individual income tax rate from 6.5% to 6.4% took effect on January 1, 2024.
Impact on Taxpayers:
- This change applies to all taxable income exceeding the top income bracket threshold,which is $157,141 for single filers and $314,282 for married couples filing jointly.
- Individuals with taxable income below this threshold will still pay taxes based on the existing income tax brackets and rates.
- For example,a single filer with taxable income of $100,000 would pay $4,500 in income tax in both 2023 and 2024,as their income falls within the 4.5% bracket.
Future Reductions:
- South Carolina aims to further reduce the top individual income tax rate to 6% by 2026.
- The state plans to achieve this through gradual annual reductions of 0.1% each year.
Additional Resources:
- South Carolina Department of Revenue website:https://dor.sc.gov/
- Information on individual income tax rates and brackets:https://dor.sc.gov/tax/individual-income
- Governor McMaster’s press release announcing the tax cut:https://www.abccolumbia.com/2023/11/06/sc-governor-announces-2024-tax-rate-cuts-for-sc-businesses/
What Does This Mean for You?
The impact of these changes will vary depending on your state and individual circ*mstances. If you live in a state with lower income tax rates, you can expect to keep more of your hard-earned money. Those eligible for new or expanded tax credits could see additional savings.
However, it’s important to remember that tax cuts are just one piece of the puzzle when it comes to managing your finances. It’s always wise to consult with a qualified tax professional to understand how these changes will affect you and make informed decisions about your finances.
