New State Tax Changes You Need to Know
State tax changes are sometimes overlooked but may affect your income and what you’ll pay for groceries, gas, and property this year.


Federal taxes get a lot of attention — especially before, during, and after tax season. But state taxes sometimes go unnoticed, even though some of the highest taxes people in the U.S. pay are state and local taxes. And although state tax changes might not be on your newsfeed, they can affect your paycheck and how much you pay for everything from groceries to gas and your property.
Here is a summary of some state tax changes for 2023 that you need to know about.
Lower state income tax rates
Several states lowered their income tax rates this year. Even small tax rate reductions can result in significant savings, especially for those who receive traditional paychecks or have taxable income.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Arizona decreased its state income tax rate to a flat 2.5% from a high of 4.5%.
- Idaho changed to a flat state income tax rate of 5.8% (down from 6%).
- Indiana decreased its income tax rate from 3.23% to 3.15%.
Indiana’s income tax cut was part of a $1.1 billion tax package. The state’s income tax rate will continue to fall, incrementally, to 2.9%, by 2027. The tax bill passed in Arizona contained close to $2 billion in tax cuts and Idaho’s historic tax cuts came amid a $900 million state revenue surplus.
More: These States Have Lower Income Tax Rates This Year
Ohio also recently enacted income tax cuts that will phase in over two years. Beginning this year, the state’s three tax brackets go down to two.
- Ohio taxpayers making less than $26,500 a year will be exempt from income tax.
- Those earning up to $100,000 a year will be taxed at a 2.75% rate.
- Taxpayers earning above $100,000 will pay a rate of 3.5%.
For 2023, some other states with lower income tax rates are Iowa, Kentucky, Mississippi, Missouri, Nebraska, New York, and North Carolina. But this is not an exhaustive list, so keep an eye on your state's income tax rates. (For example, Connecticut will implement lower state taxes next year, in 2024.)
Massachusetts tax on high earners. Although many states are cutting income taxes, Massachusetts' millionaire's tax, enacted last year, became effective at the beginning of this year (January 1, 2023). The tax is an additional 4% on individual earnings over $1 million.
States raising gas taxes
As often happens, gas tax increases became effective in several states this year as of July 1. That includes but is not limited to California, and Maryland, where residents already deal with expensive gasoline.
Colorado, Illinois, Indiana, Iowa, Kentucky, Missouri, and Virginia also raised taxes on gasoline on the first of July.
Related: Gas Tax Increases for California, Maryland, and 7 Other States
Tax-free weekends and sales tax holidays
More than 14 states offer tax-free weekends and sales tax holidays for back-to-school and other shopping during the year. Many of those state sales tax holidays have passed.
Maryland's week-long tax holiday ran from August 13 to August 20, 2023. However, electronics and school supplies weren't tax-exempt during the tax-free week, unlike some other state sales tax holidays this year.
More: Every 2023 Tax-Free Weekend for Back-to-School Shopping
- Additionally, due to the $1.3 billion tax legislation enacted this year in Florida, Floridians can enjoy tax exemptions on items such as gas stoves, and baby, and toddler necessities.
- Meanwhile, Virginians, who initially lost their annual tax-free weekend, despite a multi-billion dollar budget surplus saw lawmakers revive the sales tax holiday. The Virginia tax-free weekend for 2023 took place in late October.
Property tax increases and property tax relief
Many states are experiencing high property tax rates. Kiplinger has reported that in some areas of the U.S., inflation is causing property tax rates to increase to the maximum amount allowed by state law. For example, residents in Michigan are experiencing higher property tax rates, as are homeowners in New York, South Carolina, and Washington.
And while property taxes are rising across much of the country, Pennsylvania extended the deadline to Dec. 31, 2023, for its rent and property tax rebates of up to $975. Those tax rebates are available to eligible older adults 65 and over and for some widows, widowers, and people with disabilities.
Also, property tax relief through a program called "STAYNJ" is coming for New Jersey homeowners age 65 or older. Eligible homeowners would get a 50% property tax credit under the new plan, which some lawmakers have said doesn't go far enough to help older adults with lower incomes.
Related: Where Inflation is Causing Property Taxes to Increase the Most
2023 state tax rebates
Last year, due mostly to revenue surpluses, more than twenty states sent billions of dollars in special tax rebate or "stimulus" payments to eligible residents.
Note: If you received a payment from your state in 2022 and filed your 2022 federal tax return, check with your tax preparer to see if you need to file an amended return. Your payment may have mistakenly been reported as taxable income.
More: States Sending Tax Rebate Checks in 2023
- For 2023, several states, including Alabama, Georgia, Montana, New Mexico, and Virginia are issuing tax rebate payments to eligible residents.
- Montana’s 2023 one-time tax rebates could be up to $2,500.
- Payment amounts and eligibility criteria differ by state.
If you believe you are eligible for a payment in these or other states but haven't received one, contact your state's Department of Revenue.
Enhanced state tax credits and incentives
Some states have increased tax credits and incentives for electric vehicles, such as Colorado's recent EV tax credit increase to $5,000. When combined with the federal EV tax credit, Coloradans can save up to $12,500 on qualifying electric cars.
However, some states, like Texas, have implemented EV taxes. Under a law recently signed by Gov. Greg Abbott, Texans who own or purchase electric vehicles will pay up to $400 to register their “clean vehicles” and $200 every time they renew their registrations. The measure is expected to bring in about $38 million in new revenue to the state.
Related: Colorado EV Tax Credit Rises to $5,000
Additionally, Earned income tax credits are increasing in Hawaii and Colorado. Similar to the federal earned income tax credit, earned income credits offered at the state level can be valuable for working families and older adults with lower incomes.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
The Best and Worst Ways for Retirees to Give on Giving Tuesday
Cash donations are certainly the most convenient, but you could be overlooking significant tax advantages by taking the easy way.
By Evan T. Beach, CFP®, AWMA® Published
-
From Breadwinner to Retiree: How to Manage the Transition
Many people arrive at retirement with mixed emotions, including anxiety. Making the transition involves a profound shift in your mindset.
By Erin Wood, CFP®, CRPC®, FBSⓇ Published
-
Another Big IRS Tax Change for Online Sellers
Selling Online Just in time for the holidays, the IRS is delaying a significant tax 1099-K reporting requirement for 2023.
By Kelley R. Taylor Last updated
-
Tax-Deductible Black Friday Deals for the Self-Employed
Black Friday Deals Some Black Friday deals can help the self-employed save on business expenses and taxes.
By Katelyn Washington Published
-
Did You Overpay for Thanksgiving Dinner?
Thanksgiving 2023 marks the second most expensive Thanksgiving dinner in history. But how much it cost depended on what you bought, where you live — and whether your state taxes groceries.
By Katelyn Washington Last updated
-
Most Expensive States for Retired Military Service Members
Military Retirement Veterans can keep more of their military retirement pay by avoiding these high-taxed, most expensive states for retired service members.
By Katelyn Washington Last updated
-
2023 401(k) Contribution Deadline Coming Soon
401(k) Contributions Year-end is the deadline for making max 401(k) contributions that can increase your savings for retirement and help lower your tax bill.
By Kelley R. Taylor Last updated
-
10 Worst States To Retire in if You Hate Paying Taxes
State Taxes Relatively high tax burdens make these places the worst states to retire.
By Katelyn Washington Last updated
-
Charitable Donations: What To Know About Scams and Taxes Before You Give
Donations Giving to a charity can make you feel good and lower your tax bill, but the IRS says to beware of fake charities.
By Katelyn Washington Last updated
-
Are I Bonds Taxable? 10 Common Situations
taxes Series I bonds are a popular investment that can also help you save on taxes, but the federal income tax consequences can be complex.
By Joy Taylor Last updated