State Tax Changes Taking Effect January 1, 2025

Nine states—Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, and West Virginia—will cut individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source rates on January 1, 2025, with another (South Carolina) making a temporary reduction permanent, with further cuts on the way. Iowa and Louisiana will transition to single-rate income taxes, continuing a recent trend of states adopting flat income taxes. New Hampshire’s tax on interest and dividends income has been repealed. And Hawaii, a state that does not automatically index its brackets to inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spendin, will substantially widen bracket widths in 2025, exposing more income to lower marginal rates.

State Individual Income Tax Rate Changes

Top Marginal Rates, 2024 and 2025

Nebraska, North Carolina, and Pennsylvania will see reductions in their corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rates on January 1, 2025. New Mexico raised corporate income taxes by eliminating its lower bracket. Louisiana became the third state to adopt permanent full expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs., and Nebraska implemented 60 percent first-year expensing, while Connecticut and Rhode Island increased their net operating loss (NOL) carryforward periods. Massachusetts and Montana implemented single-sales factor apportionment, while New Jersey created a tax credit for artificial intelligence investments. Ohio will again raise its Commercial Activity Tax gross receipts threshold. Illinois raised the exemption for its capital stock tax, while Mississippi continues to phase out its capital stock tax.

State Corporate Income Tax Rate Changes

Top Marginal Rates, 2024 and 2025

Louisiana is set to restore a 5 percent sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.  rate, up from a temporary 4.45 percent rate, to help pay for reforms elsewhere in the tax code, while broadening its tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. to include digital goods. Kansas will exempt groceries from the sales tax, narrowing its base. Illinois broadened its sales tax base to include retail leases of certain forms of tangible personal property (TPP). Georgia localities will receive authority to impose new local option sales taxes to offset the cost of a new property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. relief program.

Several states will implement property tax relief measures in 2025, and Wyoming, via a ballot measure, has enacted a distinction between residential and non-residential property for tax purposes. New Jersey will be increasing taxes on fuel, while New York and North Carolina drivers should see slight relief. States like Vermont and Wisconsin will begin taxing EV infrastructure, while Rhode Island will start taxing nicotine delivery devices.

These and other tax changes taking effect on January 1 are detailed below. Many states have routine or less notable tax changes taking effect that are not mentioned here. These include, but are not limited to, annual adjustments to income tax bracketsA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat., standard deductions, and personal exemptions; automatic formula-based changes to unemployment insurance taxes; changes in interest rates on taxes owed; administrative changes; and changes to tax credits and other narrow-based taxes or tax provisions.

Alabama Tax Changes Effective January 1, 2025

On October 1, 2024, Alabama began levying a transient occupancy tax on providers of lodging and accommodations to most temporary residents like tourists. SB150, the Alabama Tourism Tax Protection Act, extends this tax to accommodations intermediaries that facilitate those transactions beginning January 1, 2025.

Alaska Tax Changes Effective January 1, 2025

The Alaska Remote Sellers Tax Commission removed the 200-transaction threshold for sales tax compliance, effective January 1, 2025. Companies with sales into Alaska will now determine their economic nexus (the legal standard by which businesses determine their tax liability in a particular state) solely on achieving $100,000 sales volume. This change will protect firms with lower per unit selling prices and moderate sales volumes from incurring compliance responsibilities in Alaska.

Arizona Tax Changes Effective January 1, 2025

Effective January 1, 2025, residential property owners who rent their properties via long-term lodging venues will no longer be required to collect and remit local-level transaction privilege taxes (TPTs) on the income derived from long-term lodging stays of 30 days or more. This change came about through the passage of SB 1131.

Arizona SB 1131 from 2023 abolished city transaction privilege taxes on residential rental property being rented out for 30 days or more, commonly called the rental tax, effective in 2025. This tax varies by municipality with an average of 2.5 percent of monthly rent bills. Cities, towns, and other jurisdictions are then prohibited from levying a tax or fee on renting or leasing real property for rental purposes. Owners of rental properties are also required to cease charging tenants the amount of the repealed tax.

California Tax Changes Effective January 1, 2025

California’s Emergency Telephone Users Surcharges are determined by the California Governor’s Office of Emergency Services annually. Beginning January 1, 2025, the 911 Surcharge will increase from $0.30 to $0.41 per access line. The revenues fund the infrastructure and administration of the 911 emergency communication system.

California SB 1059 prohibits a city or county from including excise or sales and use taxes levied on cannabis in the definition of “gross receipts” for the purposes of any local tax or fee imposed on a cannabis retailer, effective January 1. This measure is meant to eliminate this double taxationDouble taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income. on cannabis sales.

The California Air Resources Board (CARB) passed amendments to the Low Carbon Fuel Standard for 2025 as part of the state’s ongoing efforts to achieve carbon and methane emission targets. CARB’s Standardized Regulatory Impact Assessment projected that the amendments would increase the price of gas by an additional 35 cents per gallon, on top of the 12 cents per gallon estimated effect in 2024 for a total impact of 47 cents per gallon. The impact on diesel prices is greater, increasing the total estimated levy from 14 cents per gallon in 2024 to 59 cents per gallon in 2025. This is in addition to the October 2024 passage of ABX2-1, which mandated that oil refineries maintain inventory minimums. Meant to preclude shortages from causing price spikes, the measure has already increased refining costs enough to lead to the closure of about 8 percent of the state’s refining capacity.

Colorado Tax Changes Effective January 1, 2025

Colorado amended its property tax structure under SB 24-233, which caps the annual non-school district property tax revenue growth for non-home rule jurisdictions at 5.5 percent and also adjusts residential property tax assessment rates. This represented a compromise following proposals for more dramatic changes in Colorado’s property tax system, including ballot measures that were ultimately pulled in exchange for the passage of this legislation.

Colorado SB 184 imposes a congestion impact fee of $3 per day on motor vehicle rentals less than 31 days beginning on January 1, 2025.

Connecticut Tax Changes Effective January 1, 2025

Connecticut’s net operating loss carryforwardA Net Operating Loss (NOL) Carryforward allows businesses suffering losses in one year to deduct them from future years’ profits. Businesses thus are taxed on average profitability, making the tax code more neutral. In the U.S., a net operating loss can be carried forward indefinitely but are limited to 80 percent of taxable income. period will increase from 20 to 30 years on January 1, 2025, under HB 5524. Many states now follow the federal government in allowing carryforwards for an indefinite number of years but capped at 80 percent of liability in any given year. Connecticut is the first state to provide more than 20 years of carryforwards without the annual utilization limit.

Connecticut will also continue to phase down its capital stock tax rate from its current 0.31 percent to 0.26 percent on January 1, 2025. Connecticut originally planned to begin phasing out the capital base tax, a harmful tax assessed against the average value of a company’s in-state capital, in 2021. However, during the June 2021 special session, Connecticut lawmakers delayed the phaseout of the capital base tax from January 1, 2021, to January 1, 2024.

Delaware Tax Changes Effective January 1, 2025

The Hazardous Substance Cleanup Act tax is levied on the gross receipts from sales of petroleum or petroleum products. The rate of the tax is adjusted automatically in proportion to collections in a lookback period of the previous year relative to $15 million. Beginning January 1, 2025, the tax will increase from 0.675 percent to 1.120 percent.

Delaware House Substitute 2 for HB 168 enacted a rental lodging tax on occupancy of short-term rentals. Short-term rental agreements entered into on or after January 1, 2025, are subject to a short-term rental lodging tax of 4.5 percent of the rent of short-term rentals in Delaware. For purposes of the tax, “short-term rental” refers to residential dwellings rented for no more than 31 consecutive nights and does not include hotels, motels, residential facilities of educational institutions, licensed healthcare facilities, and a few other exemptions. Some of the revenues, 12.5 percent each, are directed toward the Beach Preservation Fund, the visitor’s bureau in each county, and the Delaware Tourism Office. The remaining 62.5 percent of the revenue is deposited into the State General Fund.

Delaware’s Office of the Marijuana Commissioner will begin issuing marijuana sales licenses in 2025. The state’s 15 percent tax on retail sales of marijuana is projected to generate between $28 and $42 million in annual revenue.

Georgia Tax Changes Effective January 1, 2025

Per HB 808, enacted May 6, 2024, and approved by Georgia residents on November 5, 2024, the tangible personal property tax de minimis exemption will increase from $7,500 to $20,000 on January 1, 2025.

Georgia voters also approved Amendment 1 during the November 5 election, which functionally allows the state of Georgia to implement an assessment limit to cap assessment growth for homestead properties. It also created an overly complex and burdensome pathway for counties and municipalities to opt out of the new provision, and grants authority for an additional 1 percent local option sales tax in jurisdictions that implement the new property tax limitation.

Hawaii Tax Changes Effective January 1, 2025

Hawaii will significantly modify its individual income tax brackets under HB 2404. Starting January 1, 2025, the lowest rate of 1.4 percent will apply to single filer income below $9,600 (up from $2,400 in 2024), and the highest rate of 11 percent will apply to income exceeding $325,000 (up from $200,000). These changes, along with an increase in the size of the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. Taxpayers who take the standard deduction cannot also itemize their deductions; it serves as an alternative., will significantly reduce effective tax rates across the income distribution, while still retaining Hawaii’s complex bracket structure with 12 brackets. Brackets will be widened further in 2027, with standard deduction increases phasing in for several additional years.

The Hawaii rental motor vehicle surcharge tax increases by a fixed rate annually. Beginning January 1, 2025, the tax will increase from $6.50 per day to $7.00 per day that a vehicle is rented.

Illinois Tax Changes Effective January 1, 2025

Illinois will increase its franchise (capital stock) tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax. from $5,000 to $10,000, effective January 1, 2025. Notably, however, Illinois had once been on track to eliminate this tax altogether, a policy that has since been paused.

Illinois will also broaden its sales tax base to include retail leases of tangible personal property except motor vehicles, watercraft, aircraft, and semitrailers. Additionally, sales tax assessed on acquisitions by retailers who lease tangible personal property will be paid over the lease term by the final lessee of the TPP, rather than by the business at the time of acquisition of the TPP. This moves Illinois’ state sales tax into conformity with the majority of other states’ sales tax structures as it applies to leases of TPP. This change will also ensure that sales tax is paid by the final consumer of the eligible products, moving Illinois’ sales tax closer to that of a well-structured consumption taxA consumption tax is typically levied on the purchase of goods or services and is paid directly or indirectly by the consumer in the form of retail sales taxes, excise taxes, tariffs, value-added taxes (VAT), or income taxes where all savings are tax-deductible..

Additional changes to Illinois’ sales tax include changes made under SB 3362, enacted August 9, 2024. Under this new law, Illinois will transition to destination-based sourcing for retailers that are responsible for remitting sales taxes on retail sales of tangible personal property that occur outside of Illinois but that are made by a business with a physical presence in Illinois.

Further, to partially offset the costs to retailers of complying with sales tax collection and remittance laws, Illinois allows retailers to retain 1.75 percent of sales taxes collected. However, beginning January 1, Illinois will cap the retailers’ discount on sales due at $1,000 per month.

Finally, effective January 1, 2025, the General Assembly is commissioning a study of the state’s property tax system, with recommendations for improvement due July 1, 2026.

Indiana Tax Changes Effective January 1, 2025

Indiana will reduce its already flat individual income tax rate from its current 3.05 percent in 2024, to 3 percent on January 1, 2025, under the biennial budget bill. This improvement represents a continuation of Indiana’s commitment to reducing tax burdens for its residents by lowering its flat individual income tax rate to 2.9 percent by January 1, 2027.

Iowa Tax Changes Effective January 1, 2025

Iowa continues to implement additional tax reforms, accelerating and expanding upon initially scheduled reductions, with the individual income tax transitioning from a graduated-rate tax with a top rate of 5.7 percent in 2024 to a flat 3.8 percent tax as of January 1, 2025. When the state’s reforms began, Iowa had a top marginal rate of 8.98 percent. Under legislation enacted in 2021, the state’s inheritance taxAn inheritance tax is levied upon the value of inherited assets received by a beneficiary after a decedent’s death. Not to be confused with estate taxes, which are paid by the decedent’s estate based on the size of the total estate before assets are distributed, inheritance taxes are paid by the recipient or heir based on the value of the bequest received. is also fully phased out as of January 1, 2025.

Kansas Tax Changes Effective January 1, 2025

HB 2106 continues the phase-down of the state's sales tax on groceries by eliminating the current 2 percent grocery tax, effective January 1, 2025.

Louisiana Tax Changes Effective January 1, 2025

Under HB2, Louisiana will implement a single-rate individual income tax of 3 percent, along with a higher $12,500 standard deduction, now indexed to inflation. Louisiana will also consolidate its corporate income tax structure to a single, flat rate of 5.5 percent, effective January 1, 2025. This change will eliminate the three-bracket system with current rates ranging from 3.5 percent to 7.5 percent.

Maine Tax Changes Effective January 1, 2025

Maine will join Illinois by amending its tangible personal property tax structure to require lessees to pay sales tax on TPP leased from qualified lessors. Previously, lessors paid sales tax upfront upon purchasing property for lease. Starting on January 1, 2025, lessors can purchase such property tax-exempt using a resale certificate and will instead collect sales tax on each lease or rental payment received. Once again, this moves Maine’s sales tax structure closer to that of a consumption tax, where only the end users of goods and services pay sales tax. This reduces the incidence of double taxation on business-to-business transactions and promotes clarity and simplicity within Maine’s tax code. The Maine Supplemental Budget also provided for refunds to firms that paid sales tax on qualifying TPP purchases between January 1, 2023, and December 31, 2024.

Massachusetts Tax Changes Effective January 1, 2025

Effective January 1, 2025, Massachusetts will adopt mandatory single sales factor apportionment for corporate income tax purposes, moving away from the previous three-factor formula that included property, payroll, and double-weighted sales factors. This brings Massachusetts into alignment with the majority of states’ corporate income tax apportionment strategies.

Michigan Tax Changes Effective January 1, 2025

Michigan is continuing a phased-in exemption of the taxation of retirement income, structured by the age of the retiree, which began in 2024. In 2025, 75 percent of the exemption will be available, and it will be fully phased in as of 2026.

Minnesota Tax Changes Effective January 1, 2025

Minnesota will increase its state motor fuel tax to 31.8 cents per gallon for gasoline, diesel, and biodiesel, up from the current 28.5 cents per gallon as of 2024. This adjustment includes a 28.3-cent per gallon excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. and a 3.5-cent per gallon debt service surcharge. Alternative fuels will also see corresponding tax increases.

Minnesota also made changes to its homestead property exclusion threshold to provide relief to Minnesota homeowners. The maximum exclusion will rise from $30,400 in 2024 to $38,000, effective January 1, 2025. This maximum exclusion applies to homesteads valued at $95,000 or less, where the exclusion equals 40 percent of the market value.

The Minnesota fuel excise tax will be annually adjusted according to the National Highway Construction Cost Index 2.0 beginning on January 1, 2025. The fuel tax will increase from 28.5 cents per gallon to 31.8 cents per gallon but will be capped at a 3 percent increase in subsequent years.

Minnesota’s cigarette excise tax will increase beginning January 1, 2025, from 73.9 cents per pack to 78.6 cents per pack.

Mississippi Tax Changes Effective January 1, 2025

Effective January 1, 2025, Mississippi will implement several tax changes impacting individual taxpayers and businesses. The state will reduce the flat individual income tax rate to 4.4 percent, down from 4.7 percent in 2024. This adjustment is part of a phased plan to achieve a flat 4 percent rate by January 1, 2026.

Mississippi is also in the middle of phasing out its economically harmful corporate franchise tax, a capital stock tax, that affects firms with significant property held within Mississippi. The corporate franchise tax rate will decrease to 50 cents per $1,000 of capital in excess of $100,000, reduced from 75 cents. This reduction continues the gradual elimination of the tax, with full repeal scheduled for January 1, 2028.

Missouri Tax Changes Effective January 1, 2025

The Show Me State will decrease its top marginal individual income tax rate from 4.8 percent in 2024 to 4.7 percent effective January 1, 2025. This reduction is part of a series of tax cuts initiated under legislation enacted in 2022 (SB 3 and SB 5), which allow for a 0.1 percentage-point decrease each year that revenue goals are met, until the top rate reaches 4.5 percent.

Montana Tax Changes Effective January 1, 2025

Effective January 1, 2025, via SB 124, Montana’s corporate income tax apportionment formula will change from a three-factor formula consisting of payroll, property, and double-weighted receipts to a single-receipts factor apportionment formula.

Nebraska Tax Changes Effective January 1, 2025

Starting January 1, 2025, Nebraska will see a significant reduction in its top individual income tax rate, which will be lowered from 5.84 percent to 5.2 percent. This is part of a broader plan to gradually reduce the top rate to 3.99 percent by 2027. Additionally, the number of tax brackets will be consolidated from four to three over the next few years. These changes are aimed at providing tax relief to residents and simplifying the tax system. The corporate income tax rate will also be reduced from 6.50 percent to 6.24 percent on January 1.

Nebraska's LB1023, effective January 1, 2025, will allow employers to claim a tax credit of 50 percent of the relocation expenses paid for a qualifying employee, up to $5,000 per employee per tax year, if the employee earns $70,000 to $250,000 annually. Another benefit allows qualified employees who move to Nebraska for work to receive a one-year exemption from state income taxes on Nebraska-sourced wages.

Further, Nebraska will now allow 60 percent of the cost of eligible machinery and equipment purchases to be deducted in the first year, which falls short of the permanent full expensing provisions adopted in Louisiana, Mississippi, and Oklahoma but preserves 2024-level federal bonus depreciationDepreciation is a measurement of the “useful life” of a business asset, such as machinery or a factory, to determine the multiyear period over which the cost of that asset can be deducted from taxable income. Instead of allowing businesses to deduct the cost of investments immediately (i.e., full expensing), depreciation requires deductions to be taken over time, reducing their value and disco levels indefinitely. The new law will also allow a full first-year deduction for research and development expenditures.

LB1023 also modifies the state’s “convenience of the employer” rule governing employer withholdingWithholding is the income an employer takes out of an employee’s paycheck and remits to the federal, state, and/or local government. It is calculated based on the amount of income earned, the taxpayer’s filing status, the number of allowances claimed, and any additional amount the employee requests. requirements for remote employees who work primarily outside Nebraska. Under the new law, remote employees working for a Nebraska-based employer may be physically present in Nebraska for seven days before the convenience rule’s withholding requirements apply.

Finally, LB 34, adopted in special session, provides property tax relief via automatic school district tax credits and imposes a property tax growth cap on local governments, limiting them to the rate of inflation as measured by the GLCE Index.

Nevada Tax Changes Effective January 1, 2025

Starting January 1, 2025, infant and adult diapers will be exempt from the sales tax in Nevada.

Nevada will increase its unemployment insurance taxable wage base, effective January 1, 2025, from $40,600 in 2024 to $41,800 after January 1, 2025.

New Hampshire Tax Changes Effective January 1, 2025

New Hampshire’s tax on interest and dividends income (the I&D tax) will be repealed effective January 1, 2025. As a result, New Hampshire will officially join the ranks of states that do not levy an individual income tax at all. HB 2, enacted in June 2023, accelerated the phaseout by two years, such that it takes effect in 2025 instead of 2027.

New Jersey Tax Changes Effective January 1, 2025

The state enacted S3432 to create the Next New Jersey Program to encourage the development of artificial intelligence investments. The state will award up to $500 million in tax credits to businesses that invest a minimum of $100 million in capital for business facilities dedicated to artificial intelligence. The New Jersey Economic Development Authority (NJEDA), the administrator for this program, recently issued draft rules for the program.

A new program, StayNJ, will provide property tax relief for seniors, cutting their property taxes in half with a cap of $6,500, with applications accepted from February 2025.

The state’s gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. is set to increase by 2.6 cents per gallon effective January 1, 2025, to support the state’s transportation trust fund per the statutory scheme outlined in Chapter 7, under which New Jersey’s TTF program is required to provide nearly $11 billion over five years to support critical infrastructure improvements.

New Mexico Tax Changes Effective January 1, 2025

Effective January 1, the state will restructure its individual income tax brackets to reduce taxes for all taxpayers, with reductions targeted at the low- and middle-income levels. A new sixth bracket with a 4.3 percent rate will be added, applying to filers who earn between $16,500 and $33,500 on an individual basis and between $25,000 to $50,000 jointly.

The current graduated-rate corporate income tax structure, with rates of 4.8 percent on the first $500,000 of income and 5.9 percent on income exceeding $500,000, will be replaced with a single rate of 5.9 percent on all taxable income, effective January 1, 2025. This change eliminates the benefit of the lower marginal rate and is a rare example of an income tax increase in recent years.

New Mexico has introduced new income tax credits for the purchase of electric or plug-in electric hybrid vehicles, as well as for the purchase and installation of charging units. These credits range from $2,000 for a previously owned plug-in hybrid electric vehicle to $3,000 for a new electric vehicle during the first three years. Additionally, there is a credit of up to $400 for residential electric vehicle charging units and up to $25,000 for commercial-scale direct current charging units.

North Carolina Tax Changes Effective January 1, 2025

North Carolina’s individual income tax rate will be reduced from 4.5 percent to 4.25 percent starting January 1, 2025. This is part of a broader plan to reduce the rate further in the coming years, with a target rate of 3.99 percent. The standard deduction will be increased to $25,500 for married couples filing jointly, $19,125 for heads of household, and $12,750 for single filers.

The corporate income tax rate will be reduced from 2.5 percent to 2.25 percent starting January 1, 2025, the latest step in a planned complete phaseout by 2030.

North Carolina’s Omnibus Alcoholic Beverage Control bill, SB 527, changed the state’s alcohol regulation and taxation regime in several ways. The part of the bill that takes effect January 1, 2025, creates an exemption from the 30 percent excise tax on spiritous liquor when sold for at least $50,000 per container. Instead, that sale is subject to a use tax capped at $1,000.

Ohio Tax Changes Effective January 1, 2025

Effective January 1, 2025, the first $6 million of business gross receipts will no longer be subject to the Commercial Activity Tax (CAT), the state’s gross receipts taxGross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation, costs of goods sold, and overhead costs. Unlike a sales tax, a gross receipts tax is assessed on businesses and applies to transactions at every stage of the production process, leading to tax pyramiding.. The previous exclusion was $3 million.

Pennsylvania Tax Changes Effective January 1, 2025

As part of a scheduled series of reductions, Pennsylvania’s corporate income tax rate will decrease to 7.99 percent on January 1, down from 8.49 percent in 2024 and from an initial rate of 9.99 percent. The rate is set to decline to 4.99 percent by 2031.

Pennsylvania has long been an outlier in its limitations on net operating loss (NOL) carryforwards. Starting in 2026, NOL carryforward caps will rise 10 percentage points per year, to 50 percent in 2026 and 80 percent by 2029. As of January 1, 2025, there will be a new formula in place for calculating net losses incurred in both pre- and post-2025 tax years, though the real improvements will not begin until 2026.

Rhode Island Tax Changes Effective January 1, 2025

Rhode Island has amended its net operating loss carryforward period from five to 20 years, effective January 1, 2025. This change will improve the state’s corporate income tax competitiveness by bringing the state’s NOL tax treatment into better alignment with the NOL provisions in other states.

Rhode Island HJR 7225 establishes a tax on all electronic nicotine delivery system (ENDS) products beginning January 1, 2025. Closed-system (single-use) products will be taxed at a rate of 50 cents per mL of e-liquid, while open-system (refillable) products will be taxed at a rate of 10 percent of the wholesale price. The bill also prohibits the sale of flavored ENDS products within Rhode Island.

Via a separate law (SB 3152/HB 7927), effective for tax years commencing on or after January 1, 2025, banking institutions that are subject to taxation in multiple states have the option to allocate their Rhode Island net income utilizing a single receipts factor. This receipts factor will be calculated based on the accounting method (either cash or accrual basis) employed by the taxpayer for the relevant taxable year.

The exemption for taxable retirement income has been raised from $20,000 to $50,000. To qualify, an individual must have reached Social Security’s normal retirement age and satisfy certain federal adjusted gross incomeFor individuals, gross income is the total of all income received from any source before taxes or deductions. It includes wages, salaries, tips, interest, dividends, capital gains, rental income, alimony, pensions, and other forms of income. For businesses, gross income (or gross profit) is the sum of total receipts or sales minus the cost of goods sold (COGS)—the direct costs of producing goods requirements (under $101,000 for single, head of household, and married filing separately filers in tax year 2023 and under $126,250 for joint filers).

South Carolina Tax Changes Effective January 1, 2025

By temporary proviso, the FY 2025 budget lowered the state’s top marginal individual income tax rate for tax year 2024 by an additional 0.1 percentage points, to 6.2 percent, ahead of the statutorily scheduled reduction in 2025. The rate will be permanent in January 2025. The state is on track to eventually reduce its top rate to 6 percent.

Tennessee Tax Changes Effective January 1, 2025

Tennessee SB 2307 adds hydrogen gas to the state’s existing alternative fuels tax law beginning January 1, 2025. Hydrogen gas will then be exempt from the sales and use tax but subject to the alternative fuels tax of 21 cents per gallon.

Texas Tax Changes Effective January 1, 2025

Beginning January 1, 2025, SB 2 will allow school districts to request more state funding if their budgets come up short. The schools are given the money to make up for the loss of tax revenues due to limitations on tax increases on elderly and disabled homeowners. Additionally, beginning in January, the Texas Education Agency is required to post the maximum compressed levy rate for each school district.

Utah Tax Changes Effective January 1, 2025

Utah HB 52 establishes a cannabinoid product tax of 10 percent of the retail price for certain products with less than 5 mg of THC per serving, among other restrictions, beginning January 1, 2025.

Effective January 1, 2025, the Utah workers’ compensation insurance premium tax rate will decrease to 1.2 percent.

Vermont Tax Changes Effective January 1, 2025

H.887 (Yield Bill) mandates that all short-term rental reservation transactions occurring after August 1, 2024, will be subject to a 12 percent Meals & Rooms Tax (MRT). This marks a notable increase from the current 9 percent statewide MRT.

Vermont will begin to levy an electric vehicle infrastructure fee on January 1, 2025. Drivers of battery electric vehicles will be required to pay $89 for one year, in addition to the standard $89 registration fee. Drivers of plug-in hybrid vehicles will pay half the rate, $44.50, for one year.

Washington Tax Changes Effective January 1, 2025

Effective October 1, 2024, ESSB 6038 expands the Business & Occupation Tax exemption for certain childcare services provided by businesses primarily engaged in providing childcare.

Washington will implement a new exemption on the state portion of personal property tax for qualifying renewable energy facilities starting January 1, 2025, per Revenue Code Washington (RCW) 84.36.680. Facilities generating and storing energy must apply for and be granted the new exemption.

West Virginia Tax Changes Effective January 1, 2025

West Virginia’s income tax rates continue to phase down across the board under the provisions of SB 2033, with the state’s top rate reduced from 5.12 percent to 4.82 percent as of January 1, 2025. This law also includes provisions for future tax rate cuts if revenue goals are met.

Wisconsin Tax Changes Effective January 1, 2025

Effective January 1, Wisconsin will increase the percentage of the federal child and dependent care tax credit that taxpayers can claim as a state credit from 50 percent to 100 percent and increase the amount of expenses taxpayers can use to calculate their state credit.

Wisconsin SB 791 from 2023 established an electric vehicle charging tax to begin January 1, 2025. Electricity delivered into an electric vehicle will be taxed at a rate of 3 cents per kilowatt-hour.

Wyoming Tax Changes Effective January 1, 2025

HB 3 establishes a 50 percent property tax exemption for homeowners (or spouses) who are 65 years of age or older and have paid Wyoming property taxes for at least 25 years. The exemption is applied to the assessed value of the property. Military members who declare Wyoming as their domicile also qualify. While this exemption is set to sunset on July 1, 2027, another bill, SB 89, doubles the exemption for certain veterans (from $3,000 to $6,000 of the assessed value of a home).

Wyoming voters also passed Amendment A, which creates a separate category for residential property for taxation purposes and allows the legislature to further treat owner-occupied residential property differently.