Income Tax Rate Reductions and Delays

• Personal income tax rate decreases from 5.19% to 4.99% starting January 1, 2025, with annual reductions beginning January 1, 2026.
• Reductions can be delayed by one year if revenue estimates or reserve conditions are not met, with determinations made by the Office of Planning and Budget.

Increased Standard and Personal Deductions

• Standard deduction for married couples increases from $24,000 to $30,000, and for singles from $12,000 to $15,000, with annual increases until reaching $36,000 and $18,000 respectively.
• Personal exemption per dependent rises from $4,000 to $5,000, with annual increases up to $6,000.
• Retirement income exclusions are set at $35,000 for certain years, increasing to $70,000 for 2027, based on eligibility.

Tax Credits Repeals and Revisions

• Multiple tax credits for manufacturers of medical supplies, PPE, pharmaceuticals, alternative fuels, electric vehicles, port traffic, and teleworking expenses are repealed.
• Credits for businesses engaged in manufacturing cigarettes for export and providing employee transportation are also repealed.

Overtime Compensation and Cash Tips Tax Exemptions

• For 2026-2028, up to $1,750 of qualified overtime pay and cash tips are exempt from taxation.
• Employers must report total overtime and tips received by employees quarterly or annually, with rules for administration and data submission.

Revenue Shortfall Reserve Management

• Establishes the "Revenue Shortfall Reserve" to hold surplus funds.
• Allows up to 1% of previous year's net revenue to fund increased K-12 needs; excess over 8-15% can be used for tax relief.

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