While most people have been consumed with the past week’s changes in federal laws, Supreme Court opinions, and the Federal Reserve activities, states have been cutting costs and returning excess funds to their residents. Whether or not you are considering a change of address or staying put, knowing what financial policies your state legislators are enacting can only work to your advantage. Here are what states are doing.
State Income Tax
Everything seems to be on the increase except for state taxes. Most states seem to be in the cutting business lately regarding taxes because they are flush with cash. Some tax cuts are temporary, while others are more permanent. However, the point is that states are cutting taxes. One view is that if your state is not cutting taxes, they may be in the minority. For example, in the state of Iowa, personal income tax is being reduced from 8.53%, one of the highest in the country, to a flat rate of 3.9% by the year 2026. Another example is Georgia, where legislation has been passed to consolidate the personal income tax from six categories into one flat rate of 4.99% from 5.75%. These state tax reductions occur in states governed by republican and democratic administrations.
Housing prices have been out of control for the past two years. But don’t worry because states are now providing real property tax cuts and rebates. For example, in New Jersey, where property taxes are the highest in the country, property tax proposals are being debated to provide rebates of up to $700 per homeowner. While in Illinois, the state with the second-highest property taxes in the country, a $300 real property tax proposal is being made. Look for state legislation where you live for a possible reduction in your property taxes.
The benefits can show up in various ways. The good news if you are a retiree is that more states are excluding some retirement income from state income taxes. For example, if you are 65 years of age or older in some states, your entire social security income will be excluded from state income taxes, while in other states, only some portions will be excluded. Social security will be excluded, and withdrawals from your Individual Retirement Account (IRA) will be excluded from state taxes in some states. If you are retired or approaching retirement and are considering relocating, consider states where your income tax would be less.
Recently, California passed legislation that will provide residents with tax rebates or payments ranging from $200 to $1,050, assisting in real-time through these difficult inflationary times. In Idaho, for example, the state passed legislation that will provide $75 for each dependent and resident, or 12% of their tax year 2020 liability, whichever amount is greater. These savings and funds are targeted to provide relief and not wait until next year’s tax filing season.
Today’s what’s up is about credit card use warning. Given the inflation rate and the current cost of living, many people are incurring and increasing credit debt to live. What are you going to do if a recession comes? If you have to use your credit card now, shop around for one with the lowest interest rate and or where you can transfer your prior balance if necessary. The next thing you want to do is develop a plan right now for what items you will place on your credit card and which ones you will not. And finally, figure out how soon and in what ways you can pay off the entire debt. Don’t start living on your credit card. And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC. Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.