The corporate and individual federal tax rates changed under the Tax Cuts and Jobs Act (TCJA), and now states are following suit. Many states have opted to adjust their individual income tax and corporate tax rates for 2018, and some have already adjusted their corporate rates into 2019, 2020 and 2021.
Individual Rate Changes
Individuals filing in states that pose an income tax will want to be aware of how their tax rates have changed. While some states have flat taxes and others have graduated brackets, all are subject to change. Politics, the economy, and voter preferences are all common factors in rate changes, which enable them to fluctuate frequently. It appears that certain states changed their rates as a result of the TCJA. Below is a snapshot of the individual state tax rates that changed from 2017 to 2018.
Corporate Rate Changes
The TCJA reduced the corporate tax rate from 35% to 21%, and state reactions have varied. Some have followed suit in reducing corporate rates, while others have increased their rate, or moved to a flat tax. A few states have even projected changes out to 2021. Below is a summary of the corporate state tax rate changes that were made as a result of the TCJA.
Impact on Individuals and Businesses
With state tax rates frequently changing, individuals or entities that file in multiple states will want to be prepared for upcoming changes with appropriate tax planning. Contact an Anders advisor to find out how these rate changes will impact you going forward.
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