A Review of the Louisiana State Tax System
Gain clarity on Louisiana's distinctive tax framework and the process for navigating personal and business tax responsibilities.
Louisiana’s state government is funded through a variety of taxes, with the primary sources of revenue being individual income taxes and sales taxes. These are supplemented by other taxes, such as those levied on corporate income and specific goods and services. The state’s tax structure includes different rates and rules depending on the type of tax and the entity being taxed.
The tax policies in Louisiana are subject to change based on legislative action. These adjustments can affect tax rates, deductions, and credits, influencing the overall tax liability for both individuals and businesses.
Individual Income Tax
A person’s requirement to file a Louisiana income tax return is based on their residency status and gross income. Full-year residents who are required to file a federal income tax return must also file a state return. Nonresidents and part-year residents must file if they have earned income from Louisiana sources. A part-year resident is anyone who moves into or out of Louisiana during the tax year, while a nonresident lives outside the state but earns income from within it.
Beginning with the 2025 tax year, Louisiana will use a flat tax system with a rate of 3%. This replaces the previous graduated-rate structure.
Taxpayers in Louisiana can also benefit from various tax credits designed to lower their tax liability, including credits for dependents and educational expenses. For retirees, Social Security income is not taxed by the state. Beginning in tax year 2025, taxpayers aged 65 and older can exclude up to $12,000 of their annual retirement income from taxation.
State and Local Sales Tax
As of January 1, 2025, Louisiana’s statewide sales tax rate is 5%. This tax is applied to the sale of most goods and some services across the state.
Parishes, municipalities, and other local taxing authorities have the power to levy their own sales taxes on top of the state rate. This results in a combined sales tax rate that varies depending on the specific location of a purchase. The average combined state and local sales tax rate in Louisiana is approximately 10.12%. The Louisiana Association of Tax Administrators provides an online lookup tool to find the exact rate for a specific address.
While most transactions are subject to sales tax, Louisiana law provides statewide exemptions for certain items, including:
- Groceries purchased for home consumption
- Prescription drugs
- Feminine hygiene products
- Diapers
Primary Business Taxes
Corporations operating in Louisiana are subject to two primary taxes: the Corporate Income Tax and the Corporate Franchise Tax. The Corporate Income Tax is calculated based on a company’s net income that is earned within the state. For tax years beginning on or after January 1, 2025, Louisiana will implement a flat corporate income tax rate of 5.5%.
The Corporate Franchise Tax is a distinct tax levied on the value of the capital a corporation employs in Louisiana. This tax is calculated at a rate of $2.75 for each $1,000 of capital employed in the state that exceeds $300,000. This tax is set to be repealed for tax periods beginning on or after January 1, 2026. The final franchise tax calculations will be part of the 2025 tax return filings.
Preparing Your Louisiana Tax Return
To prepare a Louisiana tax return, you will need to gather several documents, including:
- Social Security numbers for yourself, your spouse, and any dependents
- W-2s from employers
- 1099 forms for other sources of income
- A completed copy of your federal income tax return, Form 1040
Much of the information from your federal return is used to complete your Louisiana tax forms. The primary form for full-year Louisiana residents is the IT-540, which can be downloaded from the Louisiana Department of Revenue’s website. Information from your federal return, such as your Adjusted Gross Income (AGI), is a starting point for calculating your Louisiana tax liability, and you will transfer these figures to the IT-540 form.
Filing and Paying Louisiana Taxes
Once your Louisiana tax return is complete, you have several options for filing. You can mail a paper copy of your return to the Louisiana Department of Revenue at P.O. Box 201, Baton Rouge, LA 70821-0201. Alternatively, you can file your return electronically using the state’s online portal, Louisiana File Online, which is accessible through the Department of Revenue’s website.
If you owe taxes, you can pay them online through the Louisiana Department of Revenue’s website. This can be done as a direct bank transfer at no cost or by credit card for an additional processing fee. You can also mail a check or money order with a payment voucher, Form R-540V, to the address specified on the voucher.
After you have submitted your return, you should receive a confirmation number if you filed electronically. You can check the status of your refund on the Department of Revenue’s “Where’s My Refund?” online tool. The due date for on-time returns is May 15th.