Summary
A new federal law signed on July 4th introduced tax cuts and deductions for Americans, but some states and Washington D.C. have chosen not to follow these changes for their own state taxes. This means people in those areas may not see the tax benefits on their state tax returns.
Key Facts
- The new federal law, called the One Big Beautiful Bill (OBBBA), created various tax deductions and exemptions for Americans, like letting seniors have a bigger deduction and exempting tips and some overtime pay from federal taxes.
- States have different tax laws and do not have to follow federal changes unless they decide to.
- Washington D.C. has temporarily blocked these new federal tax changes from applying to its state taxes starting January 1, 2025.
- D.C.'s block on these provisions will last for 90 days, with a possible extension for an additional 225 days.
- Colorado, New York, Illinois, and Maine have all chosen not to adopt certain new federal tax breaks, so their residents will not get these tax benefits on state returns.
- States are concerned about how these federal tax breaks might affect their budgets and the complexity of making these changes.
