This bill proposes changes to the taxation of income from interest and dividends in the state. Firstly, it repeals the planned phase-out and eventual repeal of the interest and dividends tax rate that was scheduled to occur on January 1, 2027. Secondly, it removes the scheduled tax rate reductions that were set to take place after December 31, 2024. Instead, the bill sets the tax rate at 5% for all taxable periods ending on or before December 31, 2023, and at 4% for all taxable periods ending after this date.

Additionally, the bill increases the threshold for taxable income from interest and dividends. Under current law, individuals, partnerships, limited liability companies, associations, and executors with gross interest and dividend income exceeding $2,400 are subject to taxation. The bill proposes to raise this threshold to $50,000. The fiscal impact of these changes is indeterminable, as the Department of Revenue Administration cannot predict future tax liabilities or credit carryforwards. However, the changes are expected to result in a decrease in General Fund revenue from FY 2023 through FY 2025 and an increase from FY 2026 onwards. The Department will need to update tax return forms and systems to reflect these changes, but no additional administrative costs are anticipated.

Statutes affected:
Introduced: 77:3