Louisiana · the return

How Louisiana income tax works: federal AGI, the standard deduction, 3%

A walk down Form IT-540 from the first line to the last: why it starts from federal adjusted gross income, the standard deduction that replaced the old exemptions, the Schedule E subtractions that matter most, the one flat rate, the credits that depend on a $25,000 line, how the tax is withheld and estimated, and why the return is due in May. For anyone who files here.

By Charles Trautman, EA, editor

Need to Know Tax · written from Louisiana Department of Revenue sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a Louisiana practitioner

Louisiana rebuilt its income tax for 2025, and the 2026 return is the second year of the new design. Form IT-540 starts from federal adjusted gross income, line 11 of the 1040. It subtracts a short list of exempt income on Schedule E, mostly retirement income, then takes a standard deduction of $12,838 for a single filer or $25,676 for a married couple or a head of household, and multiplies the rest by 3%. There are no brackets, no personal exemptions, nothing extra for dependents, no itemized deductions beyond a sliver of medical expenses, and no local income tax anywhere in the state. The return is due May 15, a month after the federal one.

The starting point decides most of what follows. AGI is income after the adjustments on federal Schedule 1 but before the federal standard deduction and everything beneath it. An IRA contribution, an HSA deposit, student loan interest and half of self-employment tax all reduce Louisiana tax, because they come out above the line. The federal standard deduction, itemized deductions, the QBI deduction and the 2025 federal deductions for tips, overtime, seniors and car-loan interest never arrive. A server who owes no federal tax on $8,000 of tips still owes Louisiana $240 on them.

Who files

Anyone who must file a federal return and is a Louisiana resident, a part-year resident, or a nonresident with Louisiana income files here too. A resident is anyone domiciled in the state, anyone who keeps a permanent place of abode here, or anyone who spends more than six months of the year in Louisiana in the aggregate. Residents report all income on Form IT-540 and take a credit on Schedule C for net income tax paid to another state on income Louisiana also taxes. Part-year residents and nonresidents file Form IT-540B, which taxes only Louisiana-source income but uses all income to work out a ratio. Louisiana has no reciprocal agreement with any state. The details are in Moving to Louisiana.

Filing status follows the federal return. Anyone who had Louisiana tax withheld and is owed it back should file even if income is under the standard deduction.

Line 7 and Schedule E: federal AGI, less exempt income

The income section of the IT-540 is one line. Line 7 is federal AGI, or, if Schedule E is used, federal AGI after Schedule E has removed exempt income. There are no Louisiana additions for most households; the state takes the federal number and subtracts from it. Each Schedule E subtraction has a code.

The Schedule E subtractions most households use, 2026
Subtraction	Code	Limit
Taxable Social Security and Railroad Retirement	07E	All of the federally taxable amount, any age
Federal civil service and military retirement, survivor benefit payments	04E	All of it, any age
Louisiana state employee, teacher and other public retirement systems, including DROP	02E, 03E, 05E	All of it, any age
Annual retirement income exemption: private pensions, annuities and other retirement income	06E	$12,324 per person 65 or older; nothing under 65
Interest and dividends on U.S. government obligations	01E	All of it
START Saving Program deposits (Louisiana’s 529)	09E	$2,400 per beneficiary, $4,800 on a joint return; unused amounts carry forward
School expense deduction: private tuition, home-school and public school costs	17E, 18E, 19E	Up to $6,000 per dependent
Active-duty military pay, resident stationed outside Louisiana 120 or more consecutive days	10E	Up to $30,000
Pass-through entity exclusion, where the business elected to pay the tax itself	24E	The owner’s share
Louisiana bonus depreciation election	32E	Per the election (verify)

The retirement lines are explained in Louisiana for retirees, the START and school expense lines in Credits and breaks for Louisiana families. The capital gain deduction for selling a Louisiana business (code 20E) was repealed for sales after 2024; only installments from earlier sales still qualify.

The retirement subtractions split retirees into two groups. Social Security, federal and military retirement, and every Louisiana public pension come off in full at any age. Private pensions, annuities and IRA or 401(k) withdrawals get only the annual retirement income exemption, $12,324 a person, and only at 65. Under 65 they are taxed in full.

Line 8: the standard deduction

Line 8 is the Louisiana standard deduction: $12,500 for single and married-filing-separately filers and $25,000 for joint filers, qualifying surviving spouses and heads of household on the 2025 return. Both figures are indexed to the consumer price index from January 1, 2026. For 2026 they are $12,838 and $25,676, set by Revenue Information Bulletin 26-019 on September 28, 2026. The withholding tables and the estimated-tax worksheet for 2026 were printed in January with $12,875 and $25,750, slightly more than the return allows. Everyone gets it. There is no income limit and no phase-out.

There is nothing else. The $1,000 extra deductions for each dependent, for age 65 and for blindness, and the $400 dependent credit were all repealed for 2025. A family of five takes the same $25,676 as a childless couple; a couple over 65 takes the same as a couple of 40-year-olds. The state’s help for children and for age is in the credits, the school expense deduction and the retirement subtractions.

Line 9: the last trace of itemizing

Louisiana has no itemized deductions of its own, and the federal income tax deduction that used to sit here was repealed for 2022 and later. What survives is Line 9D, “excess federal itemized deductions,” and since 2022 it means one thing: the medical and dental expenses on federal Schedule A, to the extent they exceed the federal standard deduction. Someone who itemized federally with $45,000 of medical bills and a $32,200 federal standard deduction deducts the $12,800 difference here, on top of the Louisiana standard deduction. Mortgage interest, charitable gifts and state and local taxes do nothing on the Louisiana return, whether or not the taxpayer itemized, so the federal SALT cap neither helps nor hurts here.

Line 11: the rate

Line 7 minus Lines 8 and 9D is Louisiana taxable income. Line 11 is 3% of it. That is the entire computation. Wages, interest, dividends, capital gains, rent, gambling winnings, unemployment and a Roth conversion are all taxed at the same 3%. There is no lower rate for long-term gains and no deduction for gambling losses, because there is no Louisiana Schedule A to put them on. Louisiana parishes, cities and school boards do not levy income taxes, so 3% is the only rate.

Act 11 of the 2024 Third Extraordinary Session replaced the 1.85%, 3.5% and 4.25% brackets and the $4,500 or $9,000 deduction with the flat 3% for 2025. No rate change is enacted for 2027.

The credits

Louisiana credits come in priority groups, and the form takes them in a fixed order. Nonrefundable Priority 1 credits on Schedule C, chiefly the credit for tax paid to another state, come off first. Then the refundable credits on Lines 14 through 17: the child care and school readiness credits for households with federal AGI of $25,000 or less, the earned income credit, and the Schedule F credits. Then the nonrefundable Priority 3 credits on Schedule J, which is where the child care and school readiness credits land for households above $25,000.

Credits an individual is likely to claim, 2026
Credit	Amount	Where
Louisiana earned income credit	5% of the federal EIC	Line 16; refundable
Child care credit, federal AGI $25,000 or less	50% of the federal child and dependent care credit, even if the federal credit went unused	Line 14; refundable
Child care credit, federal AGI over $25,000	30% of the federal credit to $35,000; 10% to $60,000; above that the lesser of 10% or $25	Schedule J; nonrefundable, five-year carryforward
School readiness credit (now called the child care expense credit), child under 6 in a rated center	50% to 200% of the Louisiana child care credit, by the center’s star rating	Line 15 if AGI is $25,000 or less, otherwise Schedule J
Credit for net income tax paid to other states	The other state’s tax, limited to the Louisiana tax on the same income	Schedule C, with Form R-10606
Fortified roof credit (new for 2025)	Up to $10,000 per owner-occupied home, $10 million a year statewide, first come first served	Form R-90157 through LaTAP; nonrefundable, three-year carryforward (verify)

There is no Louisiana child tax credit, no renter’s credit, no senior credit and no property tax credit on the income tax return. Property tax relief is at the parish assessor and is covered in Louisiana for retirees.

Worked example: a family of four

Married, both under 65, two children ages 8 and 14, both in public school. Wages of $88,000 after $5,000 of 401(k) deferrals already out of the W-2, and $2,000 of interest and dividends. The parents paid $1,250 for required uniforms, supplies and textbooks during the year and $2,000 of after-school care for the 8-year-old, which produced a $400 federal child and dependent care credit. Louisiana withholding of $1,924.

Federal AGI	$90,000
Schedule E: school expense deduction, 50% of $1,250 (code 19E)	−$625
IT-540 Line 7	$89,375
Line 8: standard deduction, joint	−$25,676
Line 10: Louisiana taxable income	$63,699
Line 11: tax at 3%	$1,911
Schedule J: child care credit, lesser of 10% of $400 or $25	−$25
Louisiana tax after credits	$1,886
Withholding	−$1,924
Refund	$38

The federal standard deduction of $32,200 and the two children played no part in the deduction. The withholding came out $38 high because the tables run at 3.09% rather than 3%, a cushion the state built in on purpose. Had the parents put $2,400 into a START account for each child, Line 7 would drop another $4,800 and the tax by $144.

Withholding and estimated payments

Louisiana withholding is figured from Form L-4 (R-1300), the state’s own certificate, not the federal W-4. The 2026 tables assume the full standard deduction for the status claimed and withhold 3.09% of wages above it; the extra 0.09 of a point is a deliberate cushion that comes back as a refund. The leak is in households with two or more jobs, because each employer’s table shelters the first $12,875 or $25,750 of that job’s wages and only one standard deduction exists at filing. Claim fewer exemptions on the L-4 at the second job, or ask for a flat extra amount.

Anyone whose Louisiana tax after credits and withholding is expected to exceed $1,000 on a single return or $2,000 on a joint return must make estimated payments, due April 15, June 15, September 15 and January 15. The usual culprits are the self-employed, landlords, retirees with large IRA withdrawals, and anyone with a big capital gain, since the state does not withhold on gains. The safe harbor loosened for 2026: Act 307 of 2026 cut the current-year test from 90% to 70%, so four equal installments totaling the lesser of 70% of this year’s tax or 100% of last year’s avoid the penalty. The penalty itself is still 12% a year, and the annualized-income method is gone. The Department’s web page still described the old 90% rule when this was written, so trust the act, not the page, and check What’s new in Louisiana for 2026.

Filing, paying and the May deadline

The return is due May 15 of the following year. May 15, 2027 falls on a Saturday, so the 2026 return should be due Monday, May 17, 2027. The six-month extension to November 15 is automatic, with no form to file, but it extends filing, not payment: tax not paid by the May date draws interest and a late-payment penalty, so pay an estimate by May through LaTAP, the Department’s online account system. E-filed refunds generally arrive in about four weeks, paper in about eight, and first-time Louisiana filers get a paper check no matter what they asked for. Dates, forms and addresses are in Louisiana calendar and forms.

What trips people up

Retirement income left in Line 7 because software carried the 1099-R gross without a Schedule E code.
Expecting the federal tips, overtime or senior deduction to lower the Louisiana tax. None of them reach the return.
A START deposit or private school tuition nobody mentioned, because the federal return did not ask.
Withholding at two jobs that each assumed the full standard deduction.
A large capital gain or IRA withdrawal with no estimated payment behind it.
Paying by the federal deadline in April and thinking the extension to November covered the balance.

Behind the scenes: why 2025 changed everything

Voters repealed the deduction for federal income taxes paid in November 2021, and the state used the money to flatten the brackets to 1.85%, 3.5% and 4.25% for 2022. In a special session in November 2024 the legislature went the rest of the way: one 3% rate, a standard deduction nearly tripled, the age-65 retirement exemption doubled, every personal and dependent exemption repealed, paid for in part by a higher state sales tax and the repeal of business credits. A large standard deduction and no exemptions leaves the return almost nothing to compute or audit, and indexing the two big numbers means the legislature need not revisit them.

Starting from federal AGI had a cost in 2025: when Congress put the tips, overtime and senior deductions below the AGI line, Louisiana kept taxing that income at 3% without a vote. Bills to create Louisiana versions died in committee, and the 2026 session did not take them up.

What to bring

Every W-2, 1099-R, SSA-1099 and brokerage 1099, with any 1099-R marked by its source: Social Security, federal, military, Louisiana public system, or private
Dates of birth for both spouses; 65 opens the retirement income exemption
Receipts for private school tuition and fees, home-school books and curricula, and public school uniforms, supplies and required textbooks, by child
START Saving Program deposits made during the year, by beneficiary
Child care receipts and, for a child under 6, Form R-10614 from the center showing its star rating
Louisiana estimated payments made, with dates, and any extension payment
If you moved or worked in another state: the dates, income by period and by state, and the other state’s return
Any letter from the Louisiana Department of Revenue

Questions people ask

I don’t owe federal tax on my tips or overtime anymore. Why do I owe Louisiana?

Because those federal deductions come off after adjusted gross income, and Louisiana starts from AGI. The tips and overtime premium are in Line 7 and nothing takes them out. The same is true of the $6,000 federal senior deduction and the car-loan interest deduction.

Does Louisiana give anything for my children?

Not in the deduction; the dependent deduction and credit ended with the 2024 return. What remains is the 5% earned income credit, the child care credits that are refundable only at $25,000 of AGI or less, and the school expense deduction of up to $6,000 per child.

Can I itemize on my Louisiana return?

Only medical expenses, and only the part of your federal Schedule A medical deduction that exceeds the federal standard deduction. Mortgage interest, charity and taxes have not been deductible in Louisiana since 2022. Everyone also takes the Louisiana standard deduction; the medical amount is in addition to it.

Is my capital gain taxed at a lower rate in Louisiana?

No. Gains are in federal AGI and taxed at 3% like everything else. The old deduction for the gain on selling a Louisiana business ended for sales after 2024. Nobody withholds on a gain, so a large one usually means an estimated payment.

Above the line counts; below the line never arrives

Get federal AGI right, code every retirement dollar on Schedule E, take the one standard deduction, and the Louisiana return is three percent of what is left.

Written by Charles Trautman, EA, editor  ·  Need to Know Tax, Lone Tree, Colorado
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Updated November 12, 2026, after the November 3 election · tax year 2026 figures · awaiting review by a Louisiana practitioner