Louisiana 2026 Tax Changes — What Residents & Business Owners Must Know
On January 1, 2026, major federal tax changes go into effect as previous TCJA provisions expire and new federal rules continue.
Louisiana residents — who already pay a state income tax — will feel these federal changes directly, and they will also impact state taxable income because Louisiana starts with federal AGI.
These Changes Affect:
- W-2 earners in New Orleans, Baton Rouge, Shreveport, Lafayette, Lake Charles
- Oil and gas workers, offshore crews, and shift workers
- Hospitality and tourism workers
- Contractors, electricians, plumbers, and skilled trades
- Small business owners, LLCs, and S-Corp operators
- Real estate investors, landlords, and STR hosts
- Families with children
- Retirees drawing IRA or pension income
Key Federal Changes Affecting Louisiana Residents
Standard Deduction Shrinks in 2026
Because Louisiana has a moderate cost of living but high household expenses in many areas (insurance, utilities, transportation), a smaller standard deduction means:
- Higher federal taxable income
- Higher Louisiana taxable income
- More families may switch back to itemizing
- Refunds may shrink for middle-income residents
Federal Tax Brackets Increase
- 12% becomes 15%
- 22% becomes 28%
- 24% becomes 31%
- dual-income households
- oil and gas workers with high overtime
- those working multiple jobs
- professionals in Baton Rouge and New Orleans
- teachers, nurses, and state employees
- households earning $60K–$250K
QBI (20% Business Deduction) Remains Federal; Louisiana Does Not Match It
QBI continues at the federal level but Louisiana does not offer a matching state-level 20% deduction.
- Federal taxable income may decrease for business owners
- Louisiana taxable income does not receive a QBI reduction
- Business owners must plan with both systems in mind
- trades and contractors
- LLCs and S-Corps
- freelancers and independent workers
- real estate agents
- small and local service businesses
Child Tax Credit Shrinks
- The federal Child Tax Credit decreases from around $2,000
- To roughly $1,000 per child
Refundability also shrinks.
Louisiana families — especially those with multiple dependents — should expect reduced refunds.
Marriage Penalty Returns
Louisiana has many dual-income households, especially in Baton Rouge, Lafayette, and New Orleans.
- Joint filers are pushed into higher brackets sooner
- Credits phase out faster
- Combined income creates higher federal taxable income
This affects couples earning between $75K–$200K combined the most.
Louisiana-Specific Tax Considerations
1. Louisiana Uses Federal AGI as the Basis for State Taxation
- reduced federal deductions
- increased federal brackets
- reduced federal credits
…all increase Louisiana taxable income.
State rates remain the same, but more income becomes taxable.
2. Oil & Gas Workers Have Special Considerations
- offshore rotations
- refinery operations
- pipeline construction
- energy sector support roles
- high overtime
- variable schedules
- per diem considerations
- complex multi-state income
2026 changes will significantly affect federal and state taxable income for these workers.
3. Hospitality & Tourism Workers Will Feel the Federal Changes
Louisiana’s tourism economy is large (especially in New Orleans, Baton Rouge, and the coastal regions).
- overtime
- tips
- dual-income households
Because credits shrink and brackets increase, these workers often see reduced refunds and higher balances due.
4. Real Estate Investors & Rental Property Owners Will See Changes
- New Orleans
- Baton Rouge
- Lafayette
- Lake Charles
- Shreveport
2026 impacts:
- capital gains on property sales
- depreciation benefits
- STR participation requirements
- rental loss classification
- timing of sales or exchanges
5. Short-Term Rental Owners Face New Federal Requirements
- New Orleans
- Baton Rouge near LSU
- Lake Charles
- Coastal and bayou communities
- reduced bonus depreciation
- stricter STR documentation
- updated safe harbor rules
- limits on offsetting losses
6. Retirement Income Planning Remains Critical
Louisiana offers certain exemptions for retirement income, but federal rules still affect:
- IRA withdrawals
- 401(k) distributions
- pension income
- investment withdrawals
- Roth conversion timing
Higher federal brackets increase the tax cost of withdrawals.
Who Is Hit Hardest in Louisiana (2026)
- Dual-income households
- Oil and gas workers
- Hospitality and tourism workers
- Business owners and contractors
- Real estate investors and landlords
- STR operators
- Families with children
- Retirees with taxable IRA or pension income
- Middle-income earners
What Louisiana Residents Should Do Before December 31, 2025
- Review state and federal withholding
- Maximize retirement contributions
- Evaluate Roth conversions
- Review business entity structure (LLC vs S-Corp)
- Prepare STR documentation
- Review capital gains exposure
- Time property or investment sales carefully
- Build a complete 2025–2026 tax strategy
Louisiana 2026 Tax FAQ
Does Louisiana conform to QBI?
No — QBI is federal-only.
Will state taxes increase?
Rates stay the same, but taxable income rises due to federal changes.
Are families affected?
Yes — child credit reductions and deductible changes impact many.
Are STR owners impacted?
Yes — depreciation and documentation rules tighten.
Are retirees affected?
Yes — federal bracket changes increase taxes on withdrawals.