Federal tax reform is having an impact on individual states' tax policies. In June, the Internal Revenue Service (IRS) released a draft of the new Form W-4 for 2019, and it was anticipated that states would take subsequent action. Major changes to the IRS tax withholding structure are prompting state leaders to decide how closely to adhere to the federal process.
State tax codes generally conform to many federal tax code provisions. The federal tax overhaul may result in states seeing:
- Higher collection rates, due to factors like repeal of the personal exemption;
- Reduced itemized deductions; and
- Limitations on the interest deduction.
To date, four states have passed new tax measures in response to the recent federal tax laws.
Idaho updating 2018 income tax withholding tables
The Idaho legislature recently passed a law to make its W-4 form conform to the federal IRS Code for tax year 2018, including more tax breaks and a new child tax credit. Employees will see significant changes to the 2018 Idaho personal income tax return.
In response to the legislation, the Idaho State Tax Commission updated state withholding tables that reflect adjustments for inflation and lower income tax rates. The law eliminates personal and dependent exemptions, and removes or caps most itemized deductions.
The Idaho State Tax Commission encourages all employees to review and complete a new federal Form W-4, if necessary. Those seeking online resources can go to Avoid a Tax Surprise – Act Now! or A Guide to Idaho Income Tax Withholding.
ISCPA & the ISTC have partnered to create a video to help CPAs educate their clients.