August 16, 2019

Which States Allow Deductions for Federal Income Taxes Paid?


Six states allow an unusual income tax deduction for federal income taxes paid. Missouri, Montana and Oregon limit these deductions by capping and/or phasing out the deduction, while Alabama, Iowa and Louisiana offer what amounts to an unlimited deduction. These deductions are detrimental to state income tax systems on many fronts, as they offer large benefits to high-income earners and undercut the adequacy and stability of state income tax systems. Notably, Iowa’s deduction is already scheduled for elimination.

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Read More: Why States That Offer the Deduction for Federal Income Taxes Paid Get It Wrong (May 2017)