West Virginia State Taxes: 2023 Update

(May 2024)

West Virginia State Taxes: 2023 Update

In This Article

Major changes to West Virginia’s taxes in 2023 require awareness and action from residents like you and your business or businesses to leverage new savings opportunities.

A sweeping 21% income tax cut across all brackets provides relief, while new refundable credits will put money back in your pocket. There are also alternative entity-level taxes now available plus an additional levy on emerging products. 

Delve into explanations of reduced income tax brackets with accompanying calculations, guides on determining property tax credit amounts, discussions on the pros and cons of elective pass-through entity level taxes, explicit requirements for the legal production and sale of cannabis-derived goods, qualification criteria for capitalizing on motor vehicle and other credits, and tips to stay current on WV tax laws in the future.

SUMMARY

  1. Review New Income Tax Rates
  2. Identify Refundable Property Tax Credits
  3. Learn All Requirements to Qualify for Vehicle Tax Credit
  4. Weigh Pros and Cons of Elective Pass-Through Entity Tax
  5. Understand the Requirements to Produce and Sell Hemp and Kratom
  6. Capitalize on Tax Exemptions and Credits
  7. Stay Informed on Ever-Changing West Virginia Taxes

Recap

1. Review New Income Tax Rates

https://tax.wv.gov

To keep up with the 2023 tax updates of West Virginia, review the new income tax rates and brackets in detail. Recalling, on March 7, 2023, Governor Jim Justice signed HB 2526 to immediately reduce West Virginia’s income tax rates retroactive to January 1 for tax year 2023.

Some key aspects of the tax revisions include an average cut of approximately 21-22% across all tax brackets, with the bottom rate reduced from 3% to 2.36% and the top bracket cut from 6.5% to 5.12%. Notably, there’s a significant 37% reduction for incomes exceeding $40,000 and an over 18% cut for incomes at $25,000 or more. The tax department has updated withholding tables, and while changes are voluntary for employers in 2023, excess withholding and estimated payments are eligible for full refunds when filing tax year 2023 returns in 2024.

Thoroughly calculate your expected West Virginia income tax reduction for 2023 depending on your specific taxable income figure and filing status using the detailed bracket comparisons.

Determine if withholding and estimated payments sufficiently reflect new rates or excess exists eligible for sizable refund.  

2. Identify Refundable Property Tax Credits

To be aware of West Virginia’s 2023 tax revisions, know the available refundable property tax credits. The March 2023 legislation not only reduced income tax rates but also introduced refundable tax credits.

These credits include the motor vehicle property tax credit, available to you and your businesses (excluding licensed vehicle dealers) for eligible vehicle classes. Additionally, there is a disabled veteran residential property tax credit, offering up to $5,000 to qualified disabled veterans depending on your annual residential property taxes.

The legislation also introduced the small business personal property tax credit, providing your small business, if eligible, with a credit equal to the amount paid on tangible business property, with specific thresholds still pending clarification.           

These credits will start to become available when filing your 2024 West Virginia income tax returns in 2025 depending on property taxes properly paid, beginning with 2nd half 2023 bills. 

Thoroughly review both personal and any business assets owned to determine qualification criteria for the vehicles, residential, and/or small business property tax credits. When details emerge, carefully calculate likely credit amounts based on actual property taxes paid on the associated assets. Remember to file your 2024 West Virginia income tax return to claim the credits even if you otherwise have no requirement to submit a return.

3. Learn All Requirements to Qualify for Vehicle Tax Credit

To keep pace with West Virginia’s 2023 tax reforms, qualify for the new motor vehicle property tax credit beginning with property taxes assessed as of July 1, 2023.

The property tax return filing deadline in West Virginia is October 1, 2023, for individual vehicle owners and September 1, 2023, for your business with eligible vehicle assets. The property tax payment deadline is April 1, 2024, covering assessed motor vehicle property taxes for the second half of 2023 and the first half of 2024.

Vehicle class eligibility includes various categories, and the non-refundable tax credit corresponds to the gross annual property tax liability for the vehicle, excluding discounts. The credit is not applicable to you, if you’re a licensed motor vehicle dealer, and if you own companies leasing fleet vehicles, you must pass on tax savings to consumers as rate discounts.

To maximize the vehicle property tax credit in West Virginia, it’s crucial to confirm with the WV DMV that personal trucks, vans, buses, and trailers meet the specified classifications. If you have a business fleet, consult the finance department to ensure compliance with statutory classifications.

4. Weigh Pros and Cons of Elective Pass-Through Entity Tax

To be up-to-date on West Virginia’s 2023 tax adjustments, evaluate the advantages and disadvantages of elective pass-through entity tax. SB 151 passed by the 2023 West Virginia Legislature allows eligible pass-through entities (PTEs) to make an annual election to pay state income tax at the entity level instead of passing liability through to individual owners.

The new pass-through entity tax in West Virginia offers pros such as simplifying the filing process for non-resident income and replacing the PTE-100 withholding requirement. Eligible entities include partnerships, S-corps, and limited liability companies, and the election is made by filing a new pass-through entity return.

However, there are cons, including increased complexity in income calculations, a shift in tax liability to the entity level, and irrevocability of the election once made.

If you consider the election, the tax calculation involves determining ordinary income/loss at the PTE level, allocating it to resident partners based on ownership, applying an apportionment ratio to non-resident shares, and multiplying the figures by applicable rates.

If you own an LLC, have partnerships, and other pass-through entities, consult with a knowledgeable business tax professional, recalculate liability changes if electing for 2022, and set reminders for estimated payment due dates to avoid penalties in the future.

5. Understand the Requirements to Produce and Sell Hemp and Kratom

To stay current with the 2023 tax modifications in West Virginia, understand explicit requirements to legally produce and sell hemp and Keaton. The 2023 West Virginia legislative session introduced an 11% excise tax on retail sales of specific emerging products, including hemp-derived cannabinoids and kratom.

To enter these markets, proper licensing with the West Virginia Department of Agriculture is mandatory. After approval, the tax division facilitates tax filing for the 11% excise tax, due quarterly on January 20th, April 20th, July 20th, and October 20th. Eligible product categories cover various items with regulated compounds.

For your retail business in this market seeking accurate guidance, initiating timely license applications, programming point of sale of systems, setting reminders for tax remittance, and maintaining detailed inventory and sales records for potential audits are necessary.

6. Capitalize on Tax Exemptions and Credits

To stay on top of West Virginia’s 2023 tax updates, capitalize on West Virginia’s tax exemptions and credits.

The 2023 tax changes in West Virginia include exemptions for menstrual products from state use tax and an enhanced small business tangible property tax exemption, raising the threshold to $180k. Also, a first time home buyer saving account program allows up to $5k yearly deductions from state taxes.

In 2024, incentives for residential solar include a 25% income tax credit and sales tax exemption for systems under 15 kW. Steps to take involve ensuring tax calculations exempt feminine products, utilizing the higher property value exemption for small businesses, considering home buyer savings account, and staying informed about upcoming solar incentives.

7. Stay Informed on Ever-Changing West Virginia Taxes

To stay well-versed in West Virginia’s 2023 tax developments, stay informed always! Given the sheer breadth of 2023 adjustments, it’s clear taxes in West Virginia remain a complex and oft-changing arena. To stay continually up-to-date:

  • Set Google, RSS or email alerts on “West Virginia taxes”
  • Mark key project milestones on your calendar reminder app to revisit the tax division website around major filing due dates to check for updated forms, guidance and requirements
  • Explicitly note the new due date for vehicle property taxes of April 1st annually to qualify for maximum credits
  • Meet with your tax preparer or accounting professional at least once per year
  • Maintain an organized digital or paper reference tracking new laws, key metrics like threshold amounts
  • Bookmark essential government sites
  • Follow advocacy groups
  • Read national reporting on states’ tax policy changes

Recap

West Virginia’s 2023 tax updates bring a 21% income tax cut and new refundable credits. Key actions include reviewing income tax rates, identifying property tax credits, understanding vehicle tax credit requirements, evaluating pass-through entity tax, complying with hemp and kratom regulations, capitalizing on exemptions, and staying updated on tax changes.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. . For comprehensive tax, legal or financial advice, always contact a qualified professional in your area. S’witty Kiwi assumes no liability for actions taken in reliance upon the information contained herein.

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