Halls of Shrewd'm / US Policy
No. of Recommendations: 7
An AI generated blurb just popped up onto my notifications. It says that there are multiple States that are revising their 2026 State Tax code in order to counteract
the effect of Trump's specific new tax benefits for 2025 tax returns ( due in April
of 26 ).
"These jurisdictions are rejecting certain provisions from the Federal One Big Beautiful Bill, signed in July of 2025".
The main reason being that many States base their income tax calculation on Federal Taxable Income ( MAGI, I know for certain Michigan does ). It was pointed out that the $6,000 extra deduction that many post 65 year olds will get could wreak havoc on State Tax Revenues.
I'd like to say that is pretty amazing that Trump would not have coordinated and or consulted with the States, maybe ask if his haphazard tax cuts would be problematic to States, and ask to work with them to iron out any issues.
Yeah, I'd like to think that, but it is par for the course that Trump and the "brains" behind his "policies" didn't show any foresight or planning initiatives.
Kind of exactly like his tariff policies, lol.
So if there is anybody out there thinking that their reduced Federal Adjusted Gross Income is going to lead to a lower State Tax bill, doublecheck your work. The States are not going to sit back and let Trump's fiscal boneheadedness drive them over a fiscal cliff, and they are taking steps to ensure that their tax code will sift thru the Federal breaks that the OBBB are going to give us all.
Don't get me wrong, I dislike paying taxes as much as anybody, but I also realize they are a necessary evil. While Trump may BK the Federal Government just like he BK'd his
AC Casinos, States are at least trying to take steps to counteract his rash, foolhardy
Ready-Shoot-Aim methods.
Plan on paying State tax amounts at the same rate as last year.
No. of Recommendations: 0
I'd like to say that is pretty amazing that Trump would not have coordinated and or consulted with the States, maybe ask if his haphazard tax cuts would be problematic to States, and ask to work with them to iron out any issues.
Years ago, a g/f of mine had a necklace with three rings on it. The top ring was maybe an inch in diameter. The ring below it was smaller. The bottom ring was smaller still. I called it "the management rings". The big wheel on top turns a little bit. The smaller ring below it needs to turn quite a bit more to keep up. The tiny bottom ring spins like a dervish to keep up.
Steve
No. of Recommendations: 3
The main reason being that many States base their income tax calculation on Federal Taxable Income ( MAGI, I know for certain Michigan does ).
Just a little nit picking since this is my area of professional expertise.
Federal Taxable Income is NOT the same as MAGI (Modified Adjusted Gross Income). They are very different items. Taxable Income is pretty clearly defined, while MAGI does not have a single definition, but has multiple definitions depending on the circumstances and the specific reason you are making modifications to AGI.
As to state taxes, you are right on the money noting that most states will start with some number from the Federal return (often AGI or Taxable Income) and then adjust that for state purposes, adding and subtracting various items where state tax law does not match up with the federal.
My home state, CA, starts with Federal AGI, then makes various adjustments up and down for the myriad of things that CA taxes differently. They then do a similar exercise with itemized deductions - starting with the Federal itemized and tweaking from there.
Also for those filing in CA, the state does not automatically conform to Federal law changes. They have selected a date as of which they conform to Federal law, then adjust from there, picking and choosing which new laws (or portions of law) they will conform to or partially conform to. (Grammarians may now have a field day with that sentence. It's got some bad grammar and I know it and I'm too lazy to change it.) So CA will not conform to this new deduction for seniors unless they specifically agree to it. That helps with this mad scramble to non-conformity that other states may need to engage it.
Definitely keep an eye on your state legislature to see what parts of this recent federal law your state will choose to include and exclude from their tax laws.
--Peter
