State Tax Law Changes for 2023

Most States enacted legislation in 2023 or have tax provisions that go into effect in 2023 due to legislation passed in previous years.

State Tax Law Changes by State

Here is a brief description of the 2023 state tax law changes for each State that had new tax provisions that go into effect in 2023:

Alabama

Legislation enacted in 2022 included tax provisions that go into effect in 2023:

• The first $6,000 of otherwise taxable retirement income will now be exempt from tax for those 65 or older.
• Minimum business privilege tax is decreased to $50.

Arizona

Legislation enacted in 2021 included the following the tax provision that goes into effect in 2023:

• Individual taxpayers will now be taxed at flat rate of 2.5%

Arkansas

Legislation enacted in 2023 included the following tax provisions that go into effect in 2023:

• Corporate tax rate is lowered to 5.1%.
• Top Individual tax rate is lowered to 4.7%.

Colorado

Legislation enacted in 2021 included the following tax provision that goes into effect in 2023:

• Colorado EITC will be calculated as 25% of the federal EITC

Connecticut

Included in the budget that was enacted on June 12, 2023 were the following tax provisions that go into effect in 2023:

• Extended the Corporate Business tax surcharge to apply to 2023, 2024 and 2025
• EITC is calculated at 40% of the federal credit

Delaware

Legislation enacted in 2022 included the following tax provision that goes into effect in 2023:

• Military retirement exclusion has been increased to $12,500 for military retirees under the age of 60.

Georgia

Legislation enacted in 2021 and 2023 included the following tax provisions that go into effect in 2023:

• Standard deduction for 2023 is:
  • $5,400 for Single taxpayers
  • $7,100 for Married Filing Joint taxpayers

Hawaii

Legislation enacted in 2022 included the following tax provision that goes into effect in 2023:

• Hawaii EITC is now refundable

Legislation enacted in 2023 included the following tax provisions that go into effect in 2023:

Legislation enacted on June 1, 2023 included a new Pass-Thru Entity Tax that goes into effect on January 1, 2024 and is applicable to tax years beginning after December 31, 2022. Here are the details:

• Hawaii Tax Information Release No. 2023-01 for more information.

Idaho

Legislation enacted in 2022 included the following tax provision that goes into effect in 2023:

• Individual taxpayers will be taxed at a flat rate of 5.8%

See the Tax Update for Summer 2023 page on the Idaho State Tax Commission’s website.

Illinois

The following tax provisions go into effect in 2023

• Illinois EITC is calculated as 20% of the federal EITC.
• Illinois personal exemption will be $2,625 per person.
• Instructional Materials and Supplies credit will increase to $500.

See the January 2023 Illinois Department of Revenue Informational Bulletin for more information.

Indiana

Legislation enacted in 2022 and 2023 included the following tax provisions that go into effect in 2023:

• Individual income tax rate will be reduced to 3.15% for 2023 and 2024.
• Mortgage interest deduction has been repealed.
• Increases the homestead deduction by $3,000. Homestead deduction is changed to the lesser of 60% of the assessed value or $48,000 (was $45,000).
• Conforms with Federal Internal Revenue Code as of 1/1/2023.
• The federal income tax deduction for wagering taxes is decreased to 37.5%.
• Recoupled the Indiana EITC qualifications with the Federal EITC qualifications.
• New Pass-Through Entity Tax (Signed into law on February 23, 2023)
  • Retroactive to 2022 and is applicable to years beginning after January 1, 2022.
  • Partnerships and S Corporations may elect to pay a 3.3% flat tax on their Indiana business taxable income.
  • The election must be made by an authorized person of the eligible entity on an annual basis and is irrevocable.
  • For tax year 2022 the election must be made after March 31, 2023 and before August 31, 2024. For 2023 and beyond the election cam be made at any time during the taxable year.
  • Partners or Shareholders are allowed to claim a refundable credit on their individual income tax return. The amount of credit is the pass-through entity tax that is attributable to partner or shareholder’s share of income taxable in Indiana.
  • For more information see Pass Through Entity Tax page on the Indiana Department of Revenue’s website.

Iowa

Legislation enacted in 2022 included the following tax provisions that go into effect in 2023:

• 3.9% flat tax will be phased in beginning in 2023
  • Beginning in 2023 there will be four tax brackets ranging from 4.4% to 6%
  • 2024 – 2026 – Will eliminate all rates until only a 3.9% flat tax rate applies
• Retirement income exemption – IRA and pension income is exempt from Iowa income tax for taxpayers 55 or older or taxpayers who are disabled.
• Farmer retirement income exemption – Farmers 55 or older who have farmed for at least 5 years can elect to exempt income from either cash rent or farm crop shares for all years it is earned or can elect (one lifetime election) to exclude the net capital gains from the sale of farmland.
• Corporate tax rates will be determined using the top tax rate until it reaches 5.5% at which time it will be capped.
• Deduction for federal taxes paid no longer applies beginning in 2023. Only exception for 2023 is if the federal taxes paid in 2023 is for a prior year.
• Additional Iowa Health insurance premiums deduction will only be allowed for taxpayers age 65 and older with income less than $100,000.
• Iowa alternative minimum tax is no longer applicable
• Most Iowa capital gains deductions are no longer applicable. An exception is for installment sales initiated before January 1, 2023.
• The Married Filing Separate Filing status is no longer allowed on a combined return.

For more details see the 2023 Changes to Iowa Individual Income Tax page on the Iowa Department of Revenue’s website.

Legislation enacted on May 11, 2023 created a Pass-Through Entity Tax that was retroactive to tax years beginning on or after January 1, 2022. Here are some of the details:

• Pass-Through Entity Tax (PTET) page on the Iowa Department of Revenue’s website.

Kansas

Legislation enacted during 2023 included the following tax provisions that go into effect in 2023:

• Expanded the exemption for federally taxable Social Security benefits to give Kansas taxpayers with federal AGI of between $75,000 and $100,000 the tax exemption would be lowered until it reaches zero when the AGI reaches $100,000
• Adoption credit is now 75% of the federal credit for most children and 100% of the federal credit if the child was a Kansas resident prior to the adoption and is a child with special needs.

Kentucky

Legislation was enacted on February 17, 2023 included the following tax provisions that go into effect in 2023:

• Individual income tax rates will decrease to 4.5%
• Standard deduction is $2,980 for 2023
• Updated conformity to IRC to December 31, 2022 for tax years beginning on or after January 1, 2023.
• New Pass-Through Entity Tax (signed into law on March 24, 2023)
  • Retroactive to 2022 and is applicable to tax years beginning after January 1, 2022.
  • Partnerships and S Corporations may elect to pay a 4.5% flat tax on their Kentucky business taxable income for 2023.
  • The election must be made with the consent of members of entity holding more than 50% ownership. The election is binding on all members of the entity.
  • Partners or Shareholders are allowed to claim a non-refundable credit on their individual income tax return. The amount of credit is the pass-through entity tax that is attributable to partner or shareholder’s share of income taxable in Kentucky.
  • For more information see Kentucky HB 360, Section 16 on the Kentucky Legislature website.

Maine

The following tax provisions go into effect in 2023:

• The maximum deduction for contributions to a 529 education plan is increased to $1,000
• Maine taxpayers are allowed to exempt up to $30,000 in pension income from their Maine taxable income

Maryland

Legislation enacted in 2023 included the following provisions that go into effect in 2023:

• Maryland EITC has been made permanent and will be 45% of the federal EITC amount.
• Removed the $530 cap on EITC for taxpayers without qualifying children. The Maryland EITC for these taxpayers will be 100% of the federal EITC amount.
• Expanded the child tax credit to cover all taxpayers who have children age 6 and under. They must also have AGI of $15,000 or less. The credit is refundable and is $500 per child.

Massachusetts

Legislation enacted on August 9, 2023, included the following tax provisions that go into effect in 2023:

• Child and Dependent Care Credit – Raising credit to $310 per child for 2023 and eliminating the maximum number of dependents for which the credit may be claimed. This credit will be $455 for 2024 and $600 for 2025.
• Massachusetts EITC is increased to 40% of federal EITC
• Senior Circuit Breaker – Maximum credit amount is increased to $1,755
• Rental Deduction – Maximum deduction is increased to $4,000
• Retirement income subtraction will be increased to 100% by 2028. It will be phased-in between 2023 and 2028.
• Short-term capital gains – Income tax rate on short-term capital gains will be 8% for 2023.
• Increased the threshold for when the estate tax applies to $2 million.

Michigan

Legislation that was enacted in 2023 and earlier years included the following provisions that go into effect in 2023:

• Taxability of retirement income is phased out over 4 years for those born after 1945 as follows:
  • 2023 – For those 65 or older they can exempt 25% of their retirement income
  • 2024 – For those 62 or older they can exempt 50% of their retirement income
  • 2025 – For those 59 or older they can exempt 75% of their retirement income
  • 2026 – All retirement income for those of any age are exempt from Michigan income tax.
• The Working Family Tax Credit was increased to 30% of the taxpayers federal EITC
• Individual and Fiduciary income tax rate is reduced to 4.05%

Minnesota

Legislation enacted on May 24, 2023 included the following tax provisions that go into effect in 2023:

• Change to Itemized and Standard Deduction Limitation – For taxpayers with adjusted gross income over $220,650 their itemized or standard deduction will be reduced by the lesser of:
  • 3% of the excess of the taxpayer’s adjusted gross income over $220,650 but not over $304,970; plus 10% of the taxpayer’s adjusted gross income over $304,970

or

• 80% of the standard deduction otherwise allowable.

For taxpayers with AGI over $1 million itemized deductions are reduced by 80% or their standard deduction will be reduced by 80% of the standard deduction otherwise allowable.

• New Education expense deduction which is calculated for each qualifying child for the amounts paid for education related expenses and tuition and fees paid to certain schools. The maximum subtraction allowed is $1,625 for each qualifying child in kindergarten through 6^th grade and $2,500 for each qualifying child in grades 7 -12.
• New Refundable Child Tax Credit –
  • $1,750 per qualifying child
  • Credit is fully refundable
  • Credit begins to phase out when the taxpayer’s earned income or AGI (whichever is greater) reaches:
    • $35,000 for MFJ
    • $29,500 for all other filers
  • Possibility in the future that Commissioner of Revenue may establish a process to allow taxpayers to receive an advance payment of the credit.
• Modified the Dependent Care Credit
  • Unmarried taxpayers with a newborn child that did not incur dependent care expenses will now be allowed the refundable dependent care credit. For these taxpayers the credit is referred to as the newborn credit.
  • The credit amount is calculated using the maximum amount of expenses for one dependent.
• Modified Working Family Credit
  • Credit will now be equal to 4% of the first $8,750 of earned income.
  • As a result of this change the credit is increased by:
    • $925 for a taxpayer with one qualifying child
    • $2,100 for a taxpayer with two qualifying children
    • $2,500 for a taxpayer with three or more qualifying children
  • The credit is phased out jointly with the Child Tax Credit.
• Minnesota Education Credit has been modified
  • Maximum credit is now $1,500 for qualifying expenses per qualifying child in kindergarten through grade 12 in the family
  • Credit begins to phase out when taxpayer’s AGI reaches $70,000
  • Credit is refundable
• Pension Income Tax Subtraction
  • Subtraction is for certain qualified public pension income
  • Subtraction is limited to:
    • $25,000 for MFJ and Surviving Spouse filers
    • $12,500 for all other filers
  • Subtraction phases out as follows:
    • $100,000 for MFJ and Surviving Spouse filers
    • $78,000 for other filers
• Taxability of Social Security Benefits
  • Will now allow taxpayers with AGI below $100,000 for joint returns or $78,000 for single or head of household to subtract the full amount of their Social Security Benefits from Minnesota taxable income.
• Conformity with federal IRC is now May 1, 2023. Prior year returns for 2017-2022 may be affected and taxpayers may need to file an amended return for these tax years.
• Created a tax credit for owners of agricultural assets. Credit is for farmers who sell or rent certain assets to a beginning farmer. Credit is:
  •  the lesser of 8% of the sale price or fair market value of agricultural asset or  $50,000 or
  • 10% of the gross rental income in each of the first, second and third years of the rental agreement up to a maximum of $7,000 or
  • 15% of the cash equivalent of the gross rental income for the first, second and third years of a share rental agreement up to a maximum of $10,000.
• Created a credit for a qualified investor or fund. Credit is 25% of the qualified investment in a qualified small business.

For more information see the Tax Law Changes page on the Minnesota Department of Revenue’s website.

Mississippi

Legislation enacted in 2022 included the following provisions that go into effect in 2023:

• Individual tax rate for 2023 will be 5% on income exceeding $10,000.
• The 4% tax rate on taxable income between $5,000 and $10,000 has been eliminated.

Legislation enacted in 2023 included the following provisions that go into effect in 2023”

• Allows 100% bonus depreciation on qualified property or qualified improvement property.
• Codifies that Sec. 179 expensing federal rules applies to Mississippi.

Missouri

Legislation enacted during 2022 included the following tax provisions that go into effect in 2023:

• Missouri’s top marginal individual income tax rate is reduced to 4.95%
• The amount of income that is exempt from tax is increased to $1,000
• Missouri Working Family Tax Credit
  • Credit is nonrefundable
  • Credit is 10% of Federal EITC
  • Eligibility for the credit is based on family size and income.
• Pass-Through Entity Tax
• Partnerships and S Corporations may elect to pay a tax at the highest tax rate in effect for personal income tax.
• Qualifying entities elect each year to pay the tax by submitting a form to the State of Missouri.
• Begins with tax year 2022.
• For more information see the Pass-Through Entity Tax FAQs page on the Missouri Department of Revenue’s website.

Nebraska

Legislation enacted on May 31, 2023 included the following tax provisions that go into effect in 2023:

• Top marginal individual income tax rate will be 6.64% for 2023
• Top marginal corporate income tax rate will be 7.25% for 2023
• Taxpayers may deduct 60% of their Social Security benefits included in federal AGI in determining their Nebraska taxable income

New Jersey

The following tax provision goes into effect in 2023:

• S Corporation election – Beginning on January 1, 2023, no New Jersey S Corporation election is required. A federal S Corporation election is automatically recognized for New Jersey tax purposes.

New Mexico

New Mexico enacted HB 547 on April 7, 2023 which included the following tax provisions that go into effect in 2023:

• Child Income Tax Credit is increased for taxpayers with AGI of $75,000 or less beginning in 2023. The credit per child is $600 for taxpayers with AGI of $25,000 or less; $400 for AGI between $25,0001 and $50,000; $200 for AGI between $50,001 and $75,000.
• Created new Electric Vehicle Credit
  • Credit is available for the purchase or lease of a qualified electric vehicle for tax years 2023 – 2027.
  • Credit amount is $2,500 ($4,000 for those taxpayers whose AGI is equal to or less than 200% of the federal poverty level).
  • The total credit allowed for all taxpayers is $10 million per year. Taxpayers that cannot claim the credit because of this limit in one year will be rolled over to the next year and go to the top of the list.
• Created new Electric Vehicle Charging Unit Credit
  • For tax years 2023 – 2027 a taxpayer who installs an electric charging unit may claim a credit of the lesser of $300 or the cost to purchase and install the unit.
  • The total credit allowed for all taxpayers is $1 million per year.
• Created new Energy Storage System credit
  • Credit available for taxpayers who purchase and install an energy storage system after March 1, 2023 and before December 31, 2027
  • Credit is 40% of cost up to a maximum credit of $5,000 for residences; maximum of $150,000 for commercial or agricultural property.
• Created the Rural Health Practitioner Tax Credit

Qualifying health providers that provided health care in an approved rural health care underserved area are eligible for a credit of:

• $5,000 for physicians, dentists, clinical psychologists, podiatrists and optometrists.
  • $3,000 for all other health professionals

For more information see New Mexico House Bill 547 on New Mexico Legislation website.

New York

Legislation enacted in 2022 and 2023 included the following tax provisions that go into effect for 2023:

• Individual income tax rate will be 5.5% for single filers with taxable income between $13,950 and $80,650 and joint filers between $27,900 and $161,550
• Individual income tax rate will be 6% for single filers with taxable income between $80,650 and $215,400 and joint filers with taxable income between $161,500 and $323,200.
• Empire State Child Credit has been expanded to now include children under 4 years of age.

North Carolina

Legislation enacted in 2023 and earlier years included the following tax provisions that go into effect in 2023:

• Individual tax rate will be reduced to 4.75% for 2023
• Taxpayers who had expenses that were paid for using forgiven Paycheck Protection Program loans will be required to add them back on their North Carolina income
• Now conforms to IRC as of January 1, 2023

North Dakota

Enacted legislation on April 27, 2023 (House Bill 1158) with the following provision that goes into effect in 2023:

• A single tax rate for each filing status is applicable as follows:
  • Single: 1.5% for taxable income exceeding $44,725
  • MFJ and Qualifying Widow(er): 1.5% for taxable income exceeding $74,750
  • Married filing Separate: 1.5% for taxable income exceeding $37,375
  • Head of Household: 1.5% for taxable income exceeding $59,950
  • Estates and Trusts: 1.5% for taxable income exceeding $3,000

Enacted legislation on April 21, 2023 (House Bill 1176) that included the following provisions that go into effect in 2023:

• Created adoption credit which will be calculated as 10% of the federal adoption credit. The total credit cannot exceed 50% of taxpayer’s tax liability
• Created a tax credit for contributions made to a maternity home, child placing agency, or pregnancy help center. The credit is the lesser of 50% of the taxpayer’s tax liability or $2,500.

Ohio

Legislation enacted in 2022 or 2023 included the following tax provisions that go into effect in 2023:

• Conforms to IRC as of 3/15/2023. This includes the changes enacted in the Inflation Reduction Act and the Consolidated Appropriations Act (2023).
• Tax rate for nonbusiness income has been reduced.
• Ohio adoption credit no longer applies after tax year 2022. It expired on December 31, 2022.
• Tax Credit for Commercial Vehicle Training Expense – Employers may claim a credit for up to half the cost of training, not including wages. This credit is nonrefundable and is capped at $25,000 a year. Credit that is not used in a year may be carried forward 5 years.
• Beginning Farmer Tax Credit – New credit that is available to beginning farmers who attend a financial management program or individuals or businesses that sell or rent farmland, livestock, buildings or equipment to beginning farmers.
  • Qualifying individuals must apply to the Ohio Department of Agriculture and receive a tax credit certificate in order to claim this credit.
  • For beginning farmers that take a financial management program the credit is for the cost of the program.
  • For individuals or businesses that sell or rent farmland, etc. to a beginning farmer the credit is equal to 3.99% of one of the following:
    • If for a sale, it is the sale price.
    • If for a rental, it is the gross rental income that the individual or business received during the first three years of the rental agreement.

Budget bill was signed by the Governor in July 2023 includes the following tax provisions that go into effect in 2023:

• Individual income tax rates will be phased down and the number of income tax brackets will be reduced beginning in 2023. For 2023, the number of tax brackets will be reduced to three by consolidating the two lowest brackets and reduces the rates of the lowest and highest tax brackets.

The tax rates for 2023 will be:

2.75% – Ohio taxable income $26,050 – $92,150

3.688% – Ohio taxable income $92,150 – $115,300

3.75% – Ohio taxable income more than $115,300

Oklahoma

The following tax provision goes into effect in 2023:

• 100% bonus depreciation has been made permanent for qualifying machinery and equipment.

Oregon

Legislation enacted on July 31, 2023 created a refundable child tax credit (Oregon Kids Credit) as follows beginning in 2023:

• Applies to children under age 6 as of the close of the year who are dependents of the taxpayer.
• The credit is $1,000 per qualifying dependent (5 per return). Taxpayer qualifies for maximum credit if their Oregon AGI is $25,000 or less. Credit phases out between $25,001 and $30,000.
• Does not apply to MFS returns.
• In the future Oregon will work to create an advance of this credit by making quarterly payments to eligible taxpayers.

Other legislation enacted in 2023 included the following tax provision that applies for tax years 2020 – 2025:

• Allows a subtraction to Oregon taxable income for a personal casualty loss that is not allowed on the federal return. The personal casualty loss must be from the result of an event that is subject to a state of emergency declared by the Governor or occurs in an area subject to a Governor’s executive order invocating the Emergency Conflagration Act. Does not apply to losses due to theft.

Pennsylvania

The following tax provision goes into effect in 2023:

• Corporate income tax rate is reduced to 8.99% for 2023. Corporate rate will be reduced incrementally each year until it reaches 4.99% by 2031.

Rhode Island

The following tax provisions go into effect in 2023:

• Military pension benefits that are included in federal AGI can be subtracted for Rhode Island income purposes.
• $20,000 of taxable pension income included in federal AGI is exempt from Rhode Island income provided the taxpayer has reached “full retirement age” and has federal AGI below a certain amount.

Utah

Enacted legislation on March 22, 2023 (Utah HB 54) that included the following provisions that go into effect in 2023:

• Personal and Corporate tax rate is reduced to 4.65%
• The non-refundable Utah Earned Income Tax credit is increased to 20% of the federal EITC.
• Added an additional personal exemption amount for taxpayers with a qualifying dependent in the year of the dependent’s birth. The additional amount is $1,750 per qualifying dependent.
• Expanded the eligibility for the non-refundable Social Security benefit tax credit.

Vermont

The following tax provisions go into effect in 2023:

• Apportionment formula for business returns will use a single-sales factor beginning with tax years beginning on or after January 1, 2023.
• Minimum tax for business returns is increased for tax years beginning on or after January 1, 2023.

Virginia

Legislation enacted during 2023 included the following tax provisions that go into effect in 2023:

• Retired military service members ages 55 and older are eligible to subtract up to $20,000 of military benefits that they receive in 2023.
• Conforms with Federal Internal Revenue Code (IRC) as of December 31, 2022. Beginning in 2023 Virginia will conform on rolling basis to IRC.
• Subtraction for National Guard pay is increased to $5,500
• New Firearms Safety Device Credit
  • Credit is nonrefundable
  • Credit is up to $300 for one or more firearm safety devices in an eligible transaction
• Livable Home Tax Credit – The maximum credit is increased to $6,500
• Wholesome Food Donation Tax Credit – Allows any person engaged in the business of farming that donates food crops or wholesome food produced by the person to a nonprofit food bank to claim a credit in the amount of 50% of the fair market value of such donation, not to exceed $10,000.

West Virginia

Legislation that was enacted during 2023 included the following tax provision that goes into effect in 2023:

• Lowered the individual income tax rates. Top effective rate is lowered to 5.12%.

For more details see the West Virginia Income Tax Rate Cut and Property Tax Rebate page on the West Virginia Tax Division’s website.

Wisconsin

The following tax provision goes into effect in 2023:

• The capital loss deduction now conforms to the federal amount of $3,000.

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