In December of 2024, Governor Jeff Landy signed into law a legislative package comprising numerous bills and making sweeping changes to the Louisiana tax code and its applications to both individuals and corporations.

Some of the more significant highlights include:

Individual Income Taxes

The three-tier calculation (1.85%, 3.5%, and 4.25% for tax years 2022 through 2024) of personal income tax has been replaced with a flat rate of 3% for all brackets.

While this represents a significant increase for the lowest prior tax bracket, with reductions for the middle and upper tiers, that is not the only factor to consider.

The standard deduction was increased from $4,500 for single filers and $9,000 for married joint filers to $12,500 and $25,000, respectively, to be adjusted for inflation on an annual basis beginning in 2026.
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In addition, the tax exemption for retirement income has doubled, from $6.000 to $12,000, which, again starting in 2026, will also be adjusted for inflation annually.

Corporate Taxes

On the corporate front, the flat tax rate drops from 7.5% to 5.5%―a significant savings for business.

In another piece of good news for Louisiana’s larger corporations, the corporate franchise tax on those businesses with over $500 million in annual revenue was eliminated.

Further, the new legislation establishes a bonus depreciation deduction of up to 100%, or full expensing, of the cost of business property and related expenses during the year the costs were incurred, rather than depreciating them over the officially estimated course of its useful life.

But there’s always an offset.

Sales & Use Taxes

Louisiana’s sales and use tax (when combined with local sales taxes, we rank very high on sales taxes among the 50 states) rises from 4.45% to 5%, effective for tax years 2025 through 2029. Beginning in 2030, the sales tax will drop to 4.75%.

The vendor’s compensation cap, which represents the limitation on the 1.05% of sales and use tax revenues collected by a given vendor which are allowed to be retained by that vendor, has been cut in half, dropping from $1,500 to $750 each calendar month. The cap applies to each vendor, whether that vendor has one or numerous locations at which sales and use taxes are collected.

Further, the new legislation provides that the vendor’s compensation is now only to be calculated on certain of the sales and use taxes, which effectively reduces the 1.05% compensation rate to 0.84%.

Other Notable Tax Changes

The legislation includes caps on some existing tax credits, and the repeal or sunsetting of other tax credits and initiatives.

New tax credit caps include those pertaining to:

• Motion Picture Production Tax Credit―Issuance of final certification of applications for this credit received by the Louisiana Department of Economic Development (DED) on or after July 1, 2025, will be limited to $125 million annually, down from $150 million. Also reduced to $125 million (from $180 million) is the annual cap on claiming or transferring such credits. No unused portion of an annual permissible amount may be carried over into later years.
• Research & Development Tax Credit―This credit has been capped at $12 million for claims on tax returns due on or after July 1, 2025. Unused portions of the capped amount may not be carried over into subsequent years.
• Rehabilitation of Historic Structures Tax Credit―For Part II applications received by the Louisiana Department of Culture, Recreation and Tourism on or after January 1, 2025, the annual cap on this tax credit decreases to $85 million from $125 million. Again, no unused capped amounts may be carried over into later years.

 
The list of tax credits and initiatives being eliminated or allowed to sunset is a long one―but quite a good portion of these are already technically expired or underutilized.

Let Rigby Financial Group’s tax experts help you make the most of the new tax reductions and mitigate the impact of the accompanying limitations and caps.

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Until next time —

Peace,

Eric