Nearly two months after Republicans' massive tax and spending bill was signed into law, state policymakers are beginning to work out how "no tax on tips" and other U.S. tax code sweeteners will play out on state returns. The answers vary by locale, leaving some states bracing for the budgetary fallout.
Taxpayers in South Carolina, Iowa and at least four other states will be able to deduct tips on their state returns. Idaho and North Dakota are among the states that will match the new $6,000 "senior bonus." And 18 states will quadruple their state and local tax (SALT) deduction to match the higher federal cap. More states could follow as legislatures return from summer breaks and begin integrating components of the $3.4 trillion legislative package known as the One Big Beautiful Bill (OBBB) into their respective tax codes.
But the new tax breaks included in President Donald Trump's signature bill, combined with the legislation's cuts to Medicaid and food assistance programs, has significant implications for some state coffers. In Colorado, where state law requires matching most federal tax breaks, legislators are convening a special session this week to address the $750 million shortfall now projected because of the changes.
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