On November 13, 2021, Louisiana voters approved Constitutional Amendment Number 2 (“CA2”)1, which amended Article VII, Section 4(A) of the Louisiana Constitution. With the adoption of this constitutional amendment, additional income tax statutory changes became effective. The purpose of this guidance is to explain changes to Louisiana’s individual income tax and to encourage taxpayers to review their withholdings and estimated tax payments beginning with the 2022 tax year. There is no impact to the 2021 tax returns due May 16, 2022.
Constitutional Changes to Individual Income Tax
CA2 contained two major changes – one specific to individual income tax and one applicable to all Louisiana income taxes:
- Maximum income tax rate for individuals set at 4.75%; and
- Federal income taxes paid may be deductible as provided by legislation.
For tax years before the 2022 tax year, Louisiana taxpayers receive a constitutionally mandated deduction for federal income tax liability. CA2 changes the nature of this deduction from constitutionally mandated to one that is permissible and authorizes the Legislature to provide for this deduction by statute.
Statutory Changes to Individual Income Tax Act 395 of the 2021 Regular Session of the Louisiana Legislature contains several statutory changes to individual income tax, all of which became effective for the 2022 tax year upon the adoption of CA2:
- Income Tax Rate Reduction
- Limitation on Excess Federal Itemized Personal Deductions
Through the 2021 tax year, taxpayers are entitled to Louisiana’s Excess Federal Itemized Personal Deductions (“EID”). If a taxpayer itemized her deductions at the federal level via IRS Schedule A, she/he received a deduction for state tax purposes equal to the amount that the federal itemized deductions exceed the federal standard deduction. Such deductions include (1) medical expenses; (2) state and local taxes paid on income or sales tax, real estate taxes, and personal property taxes; (3) interest paid on home mortgages and mortgage insurance premiums; (4) charitable contributions; (5) casualty and theft losses; and (6) certain other deductions, such as gaming losses. Beginning with the 2022 tax year, the EID is limited to medical expenses. 7 The calculation remains the same, except that medical expenses must be deductible at the federal level and exceed the federal standard deduction for the taxpayer’s filing status.