- Governor Landry signed several tax measures into law on December 4, 2024, effective as of January 1, 2025.
- Corporations and individuals will be subject to a flat tax along with increased standard deductions.
- Sales taxes will increase, applicable to retail sales, leases of personal property, and services.
Background
Widespread tax reform is coming to Louisiana taxpayers to ring in the new year. On December 4, 2024, Louisiana Governor Jeff Landry signed into law tax measures which, for the most part, take effect January 1, 2025. The half dozen bills modify corporate income and franchise taxes, individual tax rates, and sales tax. In addition, constitutional amendments addressing budgetary and tax portions of the state’s constitution will have to be approved by Louisiana voters on March 29. These are some of the high-level features of the signed legislation.
Corporations
House Bill 2 imposes a 5.5% flat tax on corporations. Currently, corporations pay between 3.5% and 7.5% in a progressive tax system with the top rate applicable when taxable income exceeds $150,000. Corporations subject to the tax may subtract $20,000 from gross income. Furthermore, the bill allows for an election to deduct bonus depreciation and amortization for costs of qualified property, qualified improvement property, and research and experimental expenditures as defined by the Internal Revenue Code. The election is made on a timely filed return by expensing such costs on the tax return.
Several credits, including the Louisiana work opportunity credit, credits for local inventory taxes paid, research and development tax credit, rehabilitation of historic structures credit, and others also received modifications. Note that several of these credits now terminate in the summer of 2025.
For tax years beginning January 1, 2026 or thereafter, House Bill 3 eliminates the corporate franchise tax.
Individuals
Similar to the corporate income tax change, House Bill 10 introduces a flat tax rate of 3% for individuals, replacing a tiered structure that currently imposes tax rates ranging from 1.85% to 4.25%. Retirees will receive a doubled exemption from $6,000 to $12,000 of their retirement income from taxation and will be adjusted annually for inflation. The Louisiana standard deduction is also receiving a dramatic increase and ongoing inflation adjustments, increasing from $4,500 to $12,500 for single and married filing separate taxpayers, and double those amounts for married filing joint, qualified surviving spouse, and head of household taxpayers.
As previously described for corporations, similar provisions for the deduction of bonus depreciation and amortization, as well as modifications to certain tax credits are also applicable to individual taxpayers.
Sales Tax
Contrary to the other tax cutting measures, House Bill 10 increases sales taxes from 4.45% to 5% through December 31, 2029 applicable to retail sales, leases of personal property, and services. After this date the rate will reduce to 4.75%. Additionally, the sales tax legislation imposes sales taxes on defined digital products beginning on or after January 1, 2025.
How Forvis Mazars Can Help
Forvis Mazars professionals are available to help you navigate these and other changes occurring to Louisiana tax laws. Please contact us to learn more.