State Tax Guide 2025: Louisiana

Moving to Louisiana offers a unique blend of vibrant culture, rich history, and a lower cost of living. Understanding the state’s tax landscape is a crucial step in planning your relocation. This guide provides a comprehensive overview of Louisiana's tax structure for 2025, focusing on the key areas that affect individuals and families.

1. Income Tax

Louisiana utilizes a progressive income tax system, meaning your tax rate increases as your income rises. The structure is relatively simple compared to many other states.

• Tax Structure: Progressive (bracketed).
• Rate Range: 1.85% to 4.25%.

For the 2025 tax year, the brackets are as follows (rates apply to taxable income after deductions and exemptions):

Key Points:

• Standard Deduction: Louisiana offers a standard deduction. For 2025, it is $9,500 for single filers and $19,000 for married couples filing jointly.
• Personal Exemption: A personal exemption of $4,500 per taxpayer and dependent is also available, further reducing your taxable income.

2. Sales Tax

Louisiana’s sales tax is a combination of state and local levies, making the total rate vary by location. It's a significant factor in your day-to-day expenses.

• State Sales Tax Rate: 4.45%
• Local Sales Tax: Parishes (counties) and municipalities can add their own sales taxes. This can push the combined rate anywhere from 8.45% to over 12% in some areas. Always check the local rate for your specific city or parish.
• What's Taxed: Most goods and many services are subject to sales tax. Louisiana has a "tax-on-services" model, meaning services like repairs, installations, and some personal care are often taxable unless specifically exempted.
• Groceries: groceries are subject to the full state sales tax rate of 4.45%, though some localities may offer a reduced rate or exemption.

3. Property Tax

While Louisiana has some of the lowest property tax rates in the United States, it's essential to understand how they are calculated.

• Overview: Louisiana’s property tax system is based on "millage rates." A mill is $1 of tax for every $1,000 of assessed value.
• Assessed Value: The assessed value is not the market value. Louisiana law requires property to be assessed at a percentage of its use value:
  • Residential: 10% of market value
  • Agricultural: 10% of market value
  • Commercial: 15% of market value
• Effective Rate: Because of the assessment ratio, the effective property tax rate in Louisiana is very low, often cited as being in the bottom five nationally. The statewide average effective rate is approximately 0.56%.
• Homestead Exemption: Louisiana offers a significant homestead exemption, which reduces the assessed value of your primary residence by $7,500. This can result in substantial savings on your annual property tax bill.

4. Other Taxes

Beyond income, sales, and property, Louisiana has several other taxes to be aware of:

• Gasoline Tax: Louisiana's excise tax on gasoline is $0.20 per gallon. This is a fixed rate and is in addition to the federal gas tax.
• "Sin" Taxes:
  • Cigarettes: The excise tax is $1.08 per pack of 20 cigarettes.
  • Alcohol: Taxes vary based on type (beer, wine, spirits) and alcohol content. The state also imposes a gallonage tax.
• Inheritance Tax: Louisiana is one of only six states that still levies an inheritance tax (tax on the person receiving the assets). However, it is structured to be very narrow:
  • Exemption: Direct descendants and spouses are generally exempt from inheritance tax.
  • Taxable: The tax primarily applies to collateral heirs, such as siblings, nieces, nephews, and distant relatives, with rates ranging from 2% to 18% on amounts above a certain threshold.

5. Retiree Taxes

For those moving to Louisiana for retirement, the state offers a favorable tax environment for retirement income.

• Retirement Income: Louisiana does not tax most retirement income. This includes distributions from:
  • Social Security
  • Private and public pension plans (including military, civil service, and teacher pensions)
  • IRA and 401(k) withdrawals
• Social Security: Fully exempt from state income tax.
• Sales Tax: While retirees benefit from no income tax on pensions, they will still pay sales tax on goods and services, which can be a significant part of a fixed-income budget.

6. Comparison to Neighboring States

Louisiana's tax structure is distinct from its neighbors, offering a unique balance of low property and no-tax-on-retirement-income, offset by a higher sales tax burden.

• Texas: Has no state income tax, which is a major advantage. However, Texas has some of the highest property tax rates in the country (over 1.6% effective rate) to compensate. Sales tax is also higher at 6.25% state rate plus local taxes.
• Mississippi: Has a progressive income tax (0% - 5%) and a lower sales tax (7% state + local). Property taxes are also low, similar to Louisiana. The primary trade-off is income tax vs. higher sales tax.
• Arkansas: Has a progressive income tax (2.0% - 5.5%) and a state sales tax of 6.5%. Property taxes are moderate. Louisiana often presents a lower overall tax burden due to its low property taxes and lack of tax on retirement income.
• Alabama: Has a progressive income tax (2.0% - 5.0%) and a state sales tax of 4.0%. Property taxes are very low, but Alabama has a state inheritance tax, similar to Louisiana.

Disclaimer

This guide is for informational purposes only and is based on Louisiana tax laws and rates for the 2025 tax year. Tax laws are subject to change at any time. This information should not be considered legal or financial advice. We strongly recommend consulting with a qualified Certified Public Accountant (CPA) or tax professional to understand how Louisiana's tax laws apply to your specific financial situation before making a relocation decision.