Expert says state tax legislation unlikely to impact most taxpayers
JEFFERSON CITY —
A local CPA on Wednesday said a proposed state income tax cut will affect people differently depending on their income.
Jeremy Morris, a tax partner at the CPA firm Williams Keepers, said changing the amount Missouri taxpayers could claim as a federal income tax deduction could lead to more of your income being taxed depending on your financial situation.
The Missouri Senate on Tuesday approved a bill that would cut the state's top income tax rate by 0.4 percent on top of a set of rate reductions lawmakers approved a few years ago. If the state meets its revenue targets, that could mean an income tax rate of 5.1 percent by 2022, down from a projected 5.9 percent for 2018. Using the Department of Revenue's tax calculation worksheet, this means a tax savings of $327.42 for a household with $50,000 in taxable income. The measure also would change how Missourians calculate their individual federal income tax deductions.
Right now, Missouri taxpayers can deduct up to $5,000 in federal income tax from their state income tax filing, or $10,000 for joint filers. The bill would change this to a percentage of your federal income tax based on income levels. The first $25,000 of your income would be eligible for a 35 percent deduction. Any income over $125,000 would not be eligible for the deduction.
Morris said changes to your federal deduction eligibility could offset any savings from the reduced top-level rate. Some high-income taxpayers might even end up paying more in taxes. He said any changes likely will be modest because the change to the state's top income tax rate is small.
"It's going to be very situation-specific depending on where your rate of federal income is," he said.
The bill still needs to go back to the House, where it originated, because of changes the Senate made. House Speaker Todd Richardson and bill sponsor Elijah Haahr both said they expect the House will accept the Senate's changes. The House adjourned Wednesday evening without acting on the bill.
If the bill passes, Morris said you should talk to your accountant as soon as possible to see if you need to change your deduction claims.
Lawmakers have until 6 p.m. Friday to send legislation to the governor's desk.