New State Tax Changes Just Hit: What to Know Now
If you live in the U.S., your state taxes may have changed on July 1, 2025. States like Alabama, California, South Carolina, and Minnesota made big tax moves. These changes include new gas taxes, sales tax updates, and even changes to your income taxes.
In this article, we’ll break down the most important tax changes, what they mean for you, and how to plan ahead.
Gas Tax Increases in Some States
Let’s start with gas and diesel taxes. These are the taxes you pay when you fill up your car or truck at the gas station. Several states increased their gas tax starting July 1.
Alabama
Alabama increased its gas tax again as part of a plan that began in 2019. This year, the tax went up 1 cent per gallon, which means you pay a little more every time you fill your tank.
California
California also raised its gas and diesel tax as part of an annual inflation adjustment. This means if prices go up in general, the gas tax goes up too. Now, drivers in California pay over 70 cents per gallon in total state taxes.
What This Means for You:
- You may spend $1–$3 more each time you get gas.
- Businesses that use trucks may raise prices to cover higher fuel costs.
- It's a good idea to track gas prices and use fuel reward programs.
Sales Tax Changes for Data Centers
Next up: sales taxes. These are the extra fees you pay when you buy things like clothes, electronics, or furniture. Some states offer sales tax exemptions for certain businesses—like data centers that store digital files.
Arkansas and Kansas
Both Arkansas and Kansas passed laws to remove sales tax on certain equipment used by data centers. This is a move to help tech companies grow in these states.
Minnesota
On the other hand, Minnesota removed its sales tax exemption for data centers. This could make it more expensive for tech companies to do business there.
What This Means for You:
- These changes may bring more jobs to Arkansas and Kansas.
- In Minnesota, companies may raise prices to cover the new tax.
- If you work in tech, this might impact where new data jobs pop up.
Income Tax Updates: Some Good, Some Bad
The biggest changes happened with income taxes. These are the taxes taken from your paycheck or paid when you file your state return. Some people saw tax cuts, while others lost tax breaks.
South Carolina
South Carolina made a big move by lowering its top income tax rate. This means high earners will pay a little less in state taxes now. The goal is to help families and attract more businesses.
Alabama
In a surprising move, Alabama repealed its overtime tax break. This tax break used to let people keep more of their money if they worked extra hours. Now, all overtime pay will be taxed like normal wages.
What This Means for You:
- If you work in South Carolina, you might see more money in your paycheck.
- In Alabama, if you work overtime, you’ll now pay more in state taxes.
- It’s smart to check your pay stub or talk to a tax expert to see the changes.
Why Are States Making These Changes?
Every year, states review their tax laws to see what’s working and what’s not. Some states want to raise money for roads, schools, or public safety. Others want to attract businesses or lower taxes to help families.
These tax changes on July 1 are part of a bigger trend. States are trying to balance their budgets while also staying competitive. Gas taxes help fund roads. Income tax cuts may boost job growth. And tech-friendly sales tax policies can bring in more companies.
How to Know If You’re Affected
You might be wondering: Does this affect me? Here’s how to find out:
Check your state’s department of revenue website.
They usually post updates every July.
Look at your paycheck.
If your take-home pay changed, it might be because of a new tax rate.
Watch gas station signs.
If prices jumped overnight, a gas tax might be the reason.
Ask your employer.
They often know how state tax changes will affect your pay or benefits.
Tips to Stay Ahead of State Tax Changes
State taxes may seem boring—but they can really affect your wallet. Here are some quick tips to stay informed:
- Sign up for tax alerts.
Many states let you get updates by email or text. - Use a tax planner app.
Apps like TurboTax or H&R Block show how changes affect your refund. - Talk to a local tax expert.
Especially if you own a business or work overtime a lot. - Plan your purchases.
If sales taxes are rising, buy big items before the change.
What to Watch Next
More states may pass new tax laws later in 2025 or in early 2026. There’s also talk about changes to property taxes, school funding, and even digital taxes on apps and online services.
Be sure to check back often or follow your state’s tax department to stay in the loop.
Final Thoughts
State taxes changed a lot on July 1, 2025, and they’re still changing. From gas taxes in California to income tax cuts in South Carolina, these updates could put more money in your pocket—or take it out.
No matter where you live, it’s smart to keep an eye on your local tax rules. A few minutes of planning today can save you hundreds of dollars later.