On December 4, 2024, Louisiana Governor Jeff Landry signed into law H.B. 10, which, effective January 1, 2025, significantly changes the personal income tax system by replacing the existing three income tax brackets, with tax rates ranging from 1.85% to 4.25%, to a flat tax rate of 3% for all filers.

H.B. 10 also raises the standard deduction from $4,500 to $12,500 for taxpayers who are single or married filing separately and from $9,000 to $25,000 for taxpayers who are married filing jointly, heads of household or surviving spouse. Beginning January 1, 2026, and thereafter, the amount of the standard deduction will be adjusted annually by the percentage increase in the Consumer Price Index.

Also, effective January 1, 2025, the retirement income exemption doubles from $6,000 to $12,000 and beginning in 2026 will be adjusted annually by the percentage increase in the Consumer Price Index.

Ernst & Young LLP insights

R-1306, Louisiana Withholding Tables and Formulas, was last updated in 2022. Starting in 2025, employers can expect annual updates to R-1306 due to the cost-of-living adjustments to the standard exemption. The 2025 update to R-1306, once available, will be published here.

Employers should consider notifying employees of the Louisiana personal income tax changes that apply in 2025 and suggest that they review their Form L-4, Employee's Withholding Allowance Certificate for any necessary updates.