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BATON ROUGE - State Revenue Secretary Cynthia Bridges has issued a statement saying the federal tax refund being sent to taxpayers in Louisiana this summer will not be taxable in Louisiana.
“Some reports have created the misconception that the federal tax refund will be taxed in Louisiana. The refund is not taxable in Louisiana,” Bridges says. “The tax refund is essentially an adjustment to prepayments (withholding) for the 2001 federal tax year. This means the refund is NOT income, no tax is due, and there will be no state tax withholding.”
Bridges stresses that Louisiana allows taxpayers to deduct all of their federal taxes from the adjusted gross income BEFORE arriving at the Louisiana tax table income. “A reduction in that credit means a correspondingly higher Louisiana tax table income,” she explains. “It’s very much like the deduction for mortgage interest on your home. If you pay off the mortgage on your house or refinance it at a lower interest rate, the amount of interest you pay will decrease. That means you will have less to deduct from the gross income figure on the federal tax return. Consequently, you will owe more in federal taxes. Those additional taxes are not a tax on your home, but are the result of a decreased credit against your income.”
Louisiana taxpayers are better off than most states when it comes to individual income taxes, Bridges says. “Taxpayers in most states do not get to deduct their federal taxes from their adjusted gross income,” Bridges points out. “I believe one of the main reasons our legislature passed this deduction some years ago was to protect our citizens from an automatic increase in the state tax each time the federal tax rates were increased by Congress.” She stresses that the deduction means Louisiana taxpayers pay LESS in state taxes whenever federal tax rates increase. She adds that since Congress has increased federal tax rates more often than they have decreased them, Louisiana taxpayers have benefited greatly over the years.
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