Happy New Year from your friends at Mize CPAs! We send our best wishes for a successful and prosperous new year and look forward to working with you in 2024.

Here are the latest updates in the state and local tax areas:

State by State News

Colorado

Repeal of State Tax Law Provision - Due to a state court of appeals decision that rendered the law invalid, the Colorado Department of Revenue has repealed regulations relating to the application of Internal Revenue Code (IRC) changes to state tax laws. Until repealed, the law applied changes to federal statutes only to the extent they were in effect in the taxable year in which they were enacted and future years. That means those changes were incorporated only prospectively and not retroactively.

Clarification of Addback Requirement for Pass-Through Entity Owners – A new Colorado income tax rule clarifies the addback requirement for owners of a pass-through entity that elects to be taxed at the entity level. If such owner takes a federal tax deduction under IRC Section 199A, state tax law generally requires that the taxpayer add back the amount for purposes of calculating Colorado taxable income. However, if the taxpayer added that amount back to federal taxable income for Colorado purposes, the taxpayer does not need to make any income adjustments. This clarifies information provided on the SALT Parity Act from the Colorado Department of Revenue.

Kansas

Starting January 1, 2024, Kansas businesses will file information reports with the Kansas Secretary of State every two years instead of an annual report every year. The content of the report will not change.

• New businesses formed in an even year will owe a report for the next even year.
• New businesses formed in an odd year will owe a report for the next odd year.
• Existing businesses will file based on the year their formation documents were first filed with the Kansas Secretary of State.
• The month and day the report is due will not change, only the year.
• Businesses can check their original formation information by going to sos.ks.gov/business/business.html and clicking “Business Search”.

Minnesota

2024 Individual Income Tax Updated Information – The state’s individual income tax brackets for 2024 will change by 5.376% from tax year 2023. The purpose of this annual adjustment is to prevent taxpayers from paying taxes solely due to inflationary changes in income. The adjustment does not change the tax rate for each income bracket. Specific 2024 income tax brackets can be found on the Minnesota Department of Revenue’s website by clicking here.

The standard deduction amounts below assume a legislative solution in 2024 to a drafting error in the 2023 tax bill that used the incorrect year for the inflation adjustment of the standard deduction, additional standard deduction for aged or blind taxpayers, and the standard deduction for dependents. Standard deduction amounts for 2024 are:

• Married Filing Jointly - $29,150
• Single and Married Filing Separately - $14,575
• Head of Household - $21,900
• Dependent exemption - $5,050

The additional standard deduction for taxpayers who are blind or age 65 and over is $1,550 if married filing jointly or a surviving spouse; and $1,950 if filing single, married filing separately, or head of household.

The standard deduction for dependents will be the greater of $1,300 or the individual’s earned income plus $400, up to the amount of the single standard deduction, plus any qualifying additional standard deduction.

If a taxpayer is allowed to claim the standard deduction and the taxpayer’s 2024 adjusted gross income is greater than $232,500 ($116,250 if married filing separately), the taxpayer will need to complete the appropriate worksheet to determine their standard deduction amount.

Ohio

The state’s Commercial Activity Tax (CAT) has undergone major changes beginning January 1, 2024. The annual minimum tax is eliminated for tax periods 2024 and thereafter. Taxpayers with taxable gross receipts below the annual exclusion amount of $3 million will no longer be subject to the CAT. Taxable gross receipts exceeding $3 million will be taxed at .26%.

Beginning in calendar year 2025 and thereafter, the exclusion amount will be increased to $6 million.

More information, including instructions for filing final CAT returns and closing existing CAT accounts can be found on the Ohio Department of Taxation website by clicking here.

For more about State and Local Tax visit MizeCPAs.com