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LAFAYETTE, La. (KPEL News) — The state’s corporate franchise tax officially ends January 1, 2026, completing Governor Jeff Landry’s tax reform package that changed Louisiana’s tax structure throughout 2025.

The franchise tax repeal is the final major piece of tax reform legislation Landry signed in December 2024 as part of his Louisiana Forward initiative. Most changes took effect January 1, 2025, but the franchise tax elimination was delayed one year.

Louisiana businesses subject to the franchise tax make their final payment in 2025 based on property values from the 2024 tax year. Calendar year taxpayers file their last CFT-620 corporate/franchise return showing franchise tax calculations for one final time.

The 0.275% tax on net worth penalized business investment regardless of profitability and lacked the caps common in other states with similar taxes. Louisiana previously stood as one of only about a dozen states still imposing franchise taxes.

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While Louisiana’s flat 3% income tax rate and increased standard deductions took effect in 2025, annual inflation adjustments for these amounts start January 1, 2026.

The standard deduction adjusts based on the Consumer Price Index for All Urban Consumers (CPI-U). Louisiana taxpayers will see slightly higher deductions when filing 2026 tax returns in 2027. Current amounts are $12,500 for single filers and $25,000 for married couples filing jointly.

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The tax reform package makes Louisiana more competitive with neighboring states, particularly Texas and Florida, which have no personal income tax. While Louisiana maintains its 3% rate, the simplified structure and increased deductions reduce the tax burden for many residents.

However, the reforms came with tradeoffs. The temporary sales tax increase through 2029 means Louisiana now has the highest average combined state and local sales tax rate in the nation, according to the Tax Foundation. The state sales tax will drop to 4.75% in 2030.

Several tax credits also sunset or face reduced caps, including the Work Opportunity Tax Credit (application window closed June 30, 2025), motion picture production credit (reduced from $150 million to $125 million annual cap), and research and development credit (limited to $12 million per fiscal year).

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Governor Landry has said the tax reforms are steps toward his long-term goal of eventually repealing Louisiana’s income tax entirely, though no specific timeline has been announced for such a move.

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