An overview of the new state tax rules for 2008

1 comment for this page [ View ]

We, at the Utah Legislature, have been working hard in the past two years to reduce taxes. Taxes have been reduced by nearly $400 million, including significant cuts and changes to the state individual income tax.

Taxpayers will likely notice these changes when completing their state individual income tax return for tax year 2007 (generally filed by April 2008) and tax year 2008 (generally filed by April 2009).

Many of us find our tax laws to be inherently confusing. I'm writing in the hopes of simplifying some of the recent changes.

For tax year 2007, Utahns will choose to pay their individual income tax under a flat tax calculation or under the traditional multi-rate system.

Taxpayers will calculate their taxes under each method on their 2007 Utah individual income tax return, but will only pay the lesser of the two amounts.

Importantly, the flat tax rate calculation for tax year 2007 will be different than the "single-rate" system that will be used for tax year 2008.

For tax year 2008, Utah will abandon the traditional multi-rate system, while the "single-rate" tax will decrease to 5 percent. In addition, most taxpayers will be able to claim new non-refundable credits, including:

* A retirement tax credit.

* A taxpayer tax credit that is calculated using federal personal exemptions and standard deduction/itemized deductions.

Taxpayers attempting to use the tax year 2007 flat tax to project the effect of the tax year 2008 "single-rate" system will be disappointed with the results, because there will be additional credits for 2008 which the tax commission has yet to make available on a form to project.

The overall goal of the recent tax changes is to reduce income taxes and make Utah more competitive with some of our neighboring states. For example, Nevada and Wyoming have no income tax, while Colorado, New Mexico and Arizona have an income tax below 5 percent. In addition, the recent tax changes stabilize Utah's tax revenue stream, allowing for better year-to-year budgeting.

I hope this information helps. More information regarding tax year 2007 and tax year 2008 is available at http://incometax.utah.gov/. An income tax calculator, which compares the estimated tax liability under tax year 2007 and tax year 2008, is available at http://gva1.utah.gov/newest/Default.aspx.

Niederhauser represents the Utah Senate's District 9.

Comments

Add a comment...

Name:
Comment:
Security Code:	Type the characters to the left in the box exactly as they appear.
Your IP:	38.103.63.16 This address is recorded for security purposes.