As we continue into the new year, 2024 brings a wave of changes in state taxes across the country. From gas taxes to property tax amendments and income tax cuts, being aware of these changes is crucial since state and local taxes are among the highest taxes most people pay.
2024 tax changes
Here are some tax shifts happening in various states that could impact your finances this year.
Note: This summary includes select changes to state tax codes for 2024 based on data from the Tax Foundation and various state revenue departments. It does not cover all tax changes in any or every state.
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Gas tax and food tax
Several states have shifts in gas tax rates for 2024.
- Oregon’s gas tax increased to 40 cents as of Jan. 1. That’s an increase of two cents per gallon from last year. The new rate keeps Oregon among the ten states in the U.S. with the highest gas taxes.
- Utah's gas tax climbed to 36.5 cents for the new year from 34.5 cents per gallon in 2023.
- Pennsylvania's gas tax dropped for the first time in about five years.
- In New Jersey, Gov. Murhpy approved a give-year 2-cent gas tax increase.
- Gas taxes in Indiana also increased by 2 cents as of April, while Illinois gas taxes are scheduled to automatcially increase again in July.
Kansas has cut its grocery tax from 4% to 2%. The Kansas food tax reduction is thanks to the state’s bipartisan“Axe the Food Tax” bill, signed into law two years ago by Kansas Gov. Laura Kelly. Last year, the tax fell from 6% to 4%. Kansas plans to eliminate its state grocery tax by 2025. Although state officials estimate the new measure could save a family of four about $17 a month, Kansas remains one of thirteen states that still tax groceries.
Oklahoma will eliminate its grocery tax on some food items.
Sales tax
From April 27-29, Texas offers an emergency preparation supplies sales tax holiday. Missouri offered a Show Me Green sales tax holiday. It ran from April 25 -29, 2024.
Several states will offer sales tax holidays throughout the year. Stay tuned to Kiplinger for information.
Also, as of April, California is exempting breast pumps and related supplies from sales tax. The exemption lasts for the next five years, until March 2029.
Property taxes by state
Pennsylvania residents can now benefit from an increase in the rent/property tax rebate, which has gone up from $650 in 2023 to $1,000 this year in 2024. To qualify for this rebate, residents must have rented an apartment or a similar type of residence in Pennsylvania and meet specific other requirements.
- The program has provided over $8 billion in property tax and rent relief to residents of Pennsylvania since it began over 50 years ago, according to the Pennsylvania Department of Revenue.
As Kiplinger has reported, Texas had been debating property taxes for over a year now, and recently, the state increased its homestead exemption from $40,000 to $100,000. (Generally, homestead exemptions remove part of your home’s value from tax.)
- The higher exemption amount is thanks to a Texas property tax bill approved by voters in November that includes billions of dollars in tax cuts.
- According to Gov. Greg Abbott’s office, the new bill also includes additional protections to prevent older adults from being priced out of their homes.
In recent developments, Wisconsin has abolished its personal property tax, thanks to the legislation passed by Gov. Tony Evers in the summer of last year.
Similarly, Colorado has made some modifications to its property tax system. One of the notable changes is the reduction in the Colorado property tax assessment rates, effective from 2024.
State tax credits 2024
Maine changed its dependent exemption tax credit. As of Jan. 1, Maine's $300 credit is refundable and will be adjusted for inflation beginning in 2024. Meanwhile, Colorado, Connecticut, and Massachusetts have enhanced their Earned Income Tax Credits (EITC), reaching more significant percentages of the federal amount.
In Connecticut, the state EITC went from 30.5% of the federal amount last year to 40% for 2024. Connecticut is one of several states that has also reduced its income tax rates.
The EITC amount in Massachusetts was previously 30% of the federal amount but has increased to 40% for 2024. Colorado’s state EITC amount rose from 25% to 38% of the federal amount.
Note: For 2024, the federal EITC amount is up to $7,830 (up from $7,430 for 2023) with three qualifying children.
Child tax credit 2024
While Congress debates potential changes to the federal child tax credit, several states have increased child and dependent tax credits for 2024.
- Colorado’s expanded child tax credit of up to $1,200 per child is effective for 2024 (tax returns normally filed in early 2025).
- Utah’s child tax credit of up to $1,000 for children under age four is effective for 2024.
- Massachusetts now has one of the highest child tax credits in the U.S. at $440 per dependent for 2024. Previously, the Commonwealth’s child and dependent tax credit was $180 per dependent. (The credit amount moved to $310 for the 2023 tax year.)
- Wisconsin has raised its child and dependent care exemption to 100% of the federal tax credit.
State income tax
Several states have provided tax cuts for residents with lower income tax rates effective in 2024.
- For example, Iowa is progressing towards a flat tax rate for 2026.
- Kentucky and North Carolina have reduced their flat tax rates, Ohio’s tax rate has dropped to 3.5%, and the top tax rate in Arkansas has dropped to 4.4% for 2024.
- South Carolina now has a reduced income tax rate of 6.4%. Additionally, Mississippi has shifted to a single-income tax rate of 4.7%.
- One million taxpayers in Connecticut are expected to benefit from the state’s first income tax cuts since the 1990s. Connecticut Gov. Ned Lamont described the state’s $51 million budget signed last year as the largest income tax cut in the history of the Constitution State.
In Alabama, overtime pay relief kicked in as of Jan. 1, so overtime pay is now exempt from the state’s 5% income tax. As Kiplinger reported, the change applies to full-time hourly workers. As a result of the new law, Alabama is the only state (of the 41 states that impose an income tax) to exempt overtime pay. However, the tax exemption is currently set to expire in 2025.
Missouri exempts federal Social Security payments from tax beginning in 2024 and Montana has introduced a two-tiered income tax system. (Montana has gone from seven tax brackets to two.) One bracket is tied to a 4.7% state income tax rate, and the other to a 5.9% tax rate.
Meanwhile, Minnesota has revamped its net investment income tax rules. (There is a 1% Minnesota state tax on a portion of net investment income over $1 million.)
New Hampshire is phasing out its interest and dividend income tax, reducing it from 4% to 3% in 2024, aiming for complete elimination by 2025.
Georgia has a new income tax rate for 2024. Gov. Brian Kemp recently approved $700 million worth of tax relief measures for individuals and businesses. It is estimated that Georgia taxpayers could save about $1.1 billion by 2024 and $3 billion over the next ten years. An acceleration in the newly signed legislation reduces the state income tax rate to 5.39% retroactive to Jan. 1, 2024.
In California, income tax rates rise this year for some taxpayers since the top tax rate on earned income effectively goes from 13.3% to 14.4% in 2024. The California 1.1% payroll tax now applies to all wage income. (It previously applied only to those making up to $153,164.) California also increased its minimum wage for fast food workers.
Alcohol tax and cigarette taxes
In Hawaii, a 70% tax on electronic cigarettes became effective Jan. 1, 2024. When Hawaii Gov. Josh Green signed the bill increasing the tax into law, Green said, “Regulation and taxation are tools that we have… And we know it works, and we know it will continue to work because this is the model that we used on traditional cigarettes.”
Maine has also modified its tobacco tax for 2024 to limit tobacco use. According to the Maine state legislature, the tax rate will be 43% of the “cost price of tobacco products sold.”
EV registration fees
Kentucky introduced an electric vehicle (EV) fee effective Jan. 1, 2024. So, if you drive an electric vehicle in Kentucky, you’ll pay an “annual ownership fee” of $120. The fee for hybrids is $60. Electric motorcycles are also subject to an annual ownership fee of $60. The fees will go to the Kentucky Road Fund, which supports infrastructure planning and construction in the Commonwealth.
Meanwhile, Tennessee's EV registration fee doubled this year to $200. Tennessee's $3.3 billion legislation signed last year by Gov. Bill Lee, has that fee rising to $274 by 2026, which would make it the highest in the U.S. New Jersey also has a new electric vehicle fee.
According to the Tax Foundation, most states tax or impose additional registration fees on electric vehicles. Although a handful (e.g., Virginia, Washington, California, Kansas, Oklahoma, Illinois, and Oregon, as of last summer) also offer some form of state EV tax credit.
Note: These changes come as the federal EV tax credit also changed as of Jan. 1. Some popular vehicles eligible for the credit last year are no longer eligible. However, in some cases, eligible buyers can now take the federal EV tax credit on qualifying vehicles at the point of sale.
Related: States That Won't 'Tax' Your Electric Vehicle
Same filing status requirement
Massachusetts and Montana require taxpayers to maintain the same filing status for state and federal returns. In Massachusetts, the new provision is designed to reduce tax avoidance involving the Commonwealth’s “Millionaires Tax.”
In its first year, the millionaires tax raised about $1.5 billion in revenue. Notably, the tax rate on short-term capital gains in Massachusetts has dropped from 12% to 8.5%.
State taxes 2024: Bottom line
These are just some legislative shifts impacting taxes in various states. However, knowing these and other changes can help you navigate the state tax landscape and your related finances.
As always, consider consulting with a tax professional or state resources to help ensure accurate compliance with any new tax rules and to maximize your tax situation this year.
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