Key State Tax Changes for 2024

Here are some tax shifts happening in various states and how they might 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.

Gas tax and food tax 

Oregon and Utah are two states that 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 10 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.

Kansas has cut its grocery tax from 4% to 2%. The 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. For now, Kansas remains one of 13 states that still tax groceries.

Tax-free shopping

Florida kicked off 2024 with its first-ever January back-to-school sales tax holiday. This tax-free period is similar to the back-to-school tax-exempt shopping offered by Florida and other states, usually in the summer.  

Floridians can buy many items tax-free for about two weeks, until Jan. 15.

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 has 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 for 2024

Additionally, 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 4 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.)

State income tax 

Several states have provided tax cuts for residents with lower income tax rates effective in 2024. 

• For example, Georgia has adopted a flat tax of 5.49% for this year, while Iowa is progressing toward 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 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. Gov. Ned Lamont has 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.

Alcohol tax and cigarette taxes

In Hawaii, a 70% tax on electronic cigarettes became effective Jan. 1, 2024. When 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 fee

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.

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 as of Dec. 31, 2023, 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.

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 in 2024.

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All contents copyright 2024 The Kiplinger Washington Editors Inc. Distributed by Tribune Content Agency LLC.