State Conformity Confusion
The new tax deductions on OT, tips, car loan interest, senior deductions are all Federal tax changes, but many states’ tax returns start their calculations using a data point on the Federal return. The question that follows any Federal tax change is whether the state will “conform” to the changes or not (called decoupling).
Since the One Big Beautiful bill was passed in July of 2025, the legislation took place AFTER many states’ legislatures had finished their assembly for the year. Now, states are reconvening and must decide whether to conform or not. If they adopt the changes, the decision then lies in whether to do that retroactively for the 2025 tax returns or to start in 2026.
This means, as we have stated in earlier blogs, that some taxpayers may have to file amended returns if their state adopts the new rules.
The video linked below explains this for SC taxpayers – the same problem is nationwide.