Louisiana abolished its state income tax effective January 1, 2025. New Orleans residents now pay 0% Louisiana state income tax — joining Texas, Florida, and Nevada as a zero-income-tax metro. The change was enacted via constitutional amendment passed by Louisiana voters in November 2024. Louisiana replaced lost income tax revenue with a higher sales tax (5% state rate, up from 4.45%) and flat corporate income tax (5.5%). New Orleans combined sales tax is approximately 10.45%. Property tax in Orleans Parish remains relatively low at approximately 0.5–0.8% effective rate. No Louisiana estate or inheritance tax.
At a glance
Key Facts
No Louisiana Income Tax — Effective January 1, 2025
Louisiana's individual income tax has been eliminated. The previous progressive rates were 1.85% (under $12,500), 3.5% (up to $50,000), and 4.25% (above $50,000). These are now 0%. All wages, investment income, retirement income, capital gains, and Social Security are free from Louisiana state income tax. Louisiana residents pay only federal income tax on earned income.
How Louisiana Replaced the Revenue
Louisiana offset the income tax elimination with: (1) State sales tax raised from 4.45% to 5.0%; (2) Corporate income tax restructured to a flat 5.5% rate; (3) Various business tax reforms. The Louisiana legislature concluded that a consumption-based tax system (sales tax) would attract higher-income residents and businesses while maintaining fiscal stability. Groceries remain exempt from Louisiana sales tax under the new system.
New Orleans Sales Tax — 10.45% Combined
New Orleans (Orleans Parish) combined sales tax: approximately 10.45% — state 5% + Orleans Parish 5% + additional special districts 0.45%. This is among the highest combined sales tax rates in the US, above Tennessee (9.55% average) and Texas (8.25% maximum). Non-food household spending is significantly affected. Groceries, prescription drugs, and some services are exempt from portions of the sales tax.
Property Tax — Orleans Parish
Property tax in Orleans Parish: approximately 0.5–0.8% effective rate on residential property — notably lower than most US states. A $400,000 home in New Orleans generates approximately $2,000–$3,200/year in property tax. New Orleans has a homestead exemption of $75,000 for owner-occupied primary residences (reducing the assessed value by $75,000 before the millage rate applies). For comparison: a $400,000 home in Houston generates approximately $7,600–$8,400/year in property tax.
No Louisiana Estate or Inheritance Tax
Louisiana has no state estate tax and no state inheritance tax. Louisiana residents pay only federal estate tax, which applies only to estates exceeding $15,000,000 in 2026 (OBBBA — permanent). Louisiana abolished its estate tax in 2008.
New Orleans vs Other Zero-Income-Tax Cities
New Orleans now joins a select group of major US cities in zero-income-tax states. Compared to the others: property tax is lower than Texas cities (Houston 1.9%, Dallas 1.9%) and competitive with Nevada (Las Vegas ~0.55%) and Tennessee (Nashville ~0.66%). Sales tax is higher than all competitors. Net tax burden for a $150,000 earner in New Orleans: better than all income-tax states (saving $5,500–$14,000+ in state income tax depending on origin state) and competitive with other no-tax metros.
Introduction
In November 2024, Louisiana voters approved a constitutional amendment eliminating the state's individual income tax entirely — effective January 1, 2025. This made Louisiana the most recent US state to abolish its income tax, and New Orleans the largest US city that is newly zero-income-tax alongside Nashville (Tennessee), Las Vegas (Nevada), and Jacksonville (Florida). For a New Orleans resident earning $150,000, the change means an annual tax saving of approximately $5,500–$7,000 that was previously paid to Louisiana in income tax. This guide covers every aspect of the tax picture for New Orleans residents under the new system.
Section 01
Before and After: The Tax Change for a New Orleans Resident
To understand the impact of Louisiana's income tax abolition, compare a typical New Orleans household's tax picture under the old and new systems:
Single Earner, $100,000 Income
2024 (under old income tax): Louisiana income tax approximately $3,858 (progressive rates). 2025 onwards: Louisiana income tax $0. Annual saving: $3,858. New sales tax cost if spending $40,000 on taxable goods: additional 0.55% sales tax = approximately $220/year. Net annual benefit: approximately $3,638.
Married Couple, $200,000 Combined Income
2024 Louisiana income tax: approximately $8,000. 2025: $0. Additional sales tax on $80,000 taxable spending: approximately $440. Net annual benefit: approximately $7,560.
Who Benefits Most
The income tax abolition benefits higher-income households most — those who were paying significant Louisiana income tax. A household earning $50,000 saved approximately $1,700/year in income tax but pays slightly more in sales tax. A household earning $300,000 saves approximately $12,000+ in income tax, more than offsetting any increased sales tax burden. Lower-income households who spend a higher proportion of income on consumption goods experience the sales tax increase proportionally more — a well-documented regressivity trade-off.
Section 02
New Orleans for Movers From High-Tax States
New Orleans has historically been overlooked in the tax migration conversation — that calculus has changed significantly with the income tax abolition.
New Orleans vs Austin, Texas
Both are now zero-income-tax. Austin property tax: ~1.8–2.0% effective rate. New Orleans property tax: ~0.5–0.8%. On a $600,000 home: Austin generates approximately $10,800–$12,000/year in property tax; New Orleans generates approximately $3,000–$4,800. New Orleans is meaningfully cheaper on property tax. Austin's cost of living (especially housing) has risen dramatically since 2019; New Orleans remains more affordable. New Orleans sales tax (10.45%) is higher than Austin (8.25%). Net: for homeowners, New Orleans has a significant property tax advantage over Austin.
New Orleans vs Nashville, Tennessee
Both zero-income-tax. Nashville property tax: ~0.66% effective rate. Very similar to New Orleans. Nashville sales tax: ~9.75% combined — slightly lower than New Orleans' 10.45%. Nashville has seen dramatic housing appreciation (60–80% since 2019). New Orleans housing market has risen but less dramatically. Climate: New Orleans carries hurricane risk; Nashville is more predictable. For cost of living vs tax burden comparison, both cities are competitive.
Remote Workers and New Residents
New Orleans has actively courted remote workers. The city offers established cultural infrastructure, a lower cost of living than many coastal metros, and now a zero-income-tax environment. The main considerations for incoming residents: property insurance (elevated in coastal Louisiana due to hurricane risk and the aftermath of Hurricanes Katrina, Ida, and others); flood insurance requirements (many properties are in FEMA flood zones requiring mandatory flood insurance at significant cost); and the higher sales tax offsetting some income tax savings.
Moving to New Orleans or adjusting to Louisiana's new zero-income-tax system? TaxHub connects you with state tax specialists for multi-state filing, business structure, and relocation tax planning.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Did Louisiana really abolish its income tax, or is this a temporary change?
The abolition is permanent and constitutional — not a temporary legislative rate reduction. Louisiana voters approved Amendment 2 to the Louisiana Constitution in November 2024, which eliminated the individual income tax from the state constitution. Because it is a constitutional amendment, it cannot be reversed by the legislature alone — another constitutional amendment requiring voter approval would be required to reinstate an income tax. This provides a high degree of permanence comparable to Nevada and Texas, which also have constitutional prohibitions on income tax.
Q
Does the income tax abolition apply to all income types including retirement income?
Yes — Louisiana's income tax abolition covers all individual income types: wages, self-employment income, investment income, capital gains, Social Security benefits, pension income, IRA and 401(k) distributions, and any other income. Louisiana residents pay $0 Louisiana state income tax on any income type. Notably, Louisiana previously already exempted Social Security from state income tax — the abolition expanded to cover all other income types fully.
Q
What is the New Orleans homestead exemption and how does it work?
The Louisiana homestead exemption for owner-occupied primary residences is $75,000 off assessed value. In Louisiana, residential property is assessed at 10% of fair market value. On a $400,000 home: assessed value = $40,000. Homestead exemption: $7,500 (10% of $75,000). Taxable assessed value: $32,500. At a New Orleans millage rate of approximately 165 mills (0.165), the annual property tax is approximately $5,363. Without homestead exemption it would be approximately $6,600. The homestead exemption is applied automatically once you file; you must own and occupy the home on January 1 of the tax year.
Q
How does New Orleans property insurance compare to other cities?
Property insurance in New Orleans and coastal Louisiana is significantly higher than the US national average and has become one of the most important financial considerations for home ownership in the city. Louisiana has experienced multiple major insurance company exits after Hurricanes Katrina (2005), Ida (2021), and others. Average homeowner's insurance in Louisiana: approximately $3,500–$6,000/year for a $400,000 home vs a national average of approximately $1,500–$2,000. Flood insurance (through NFIP or private market) adds another $500–$2,500/year for properties in flood zones — which includes most of New Orleans. Property insurance cost is a critical factor in the total cost-of-ownership calculation for New Orleans real estate.
Q
Does New Orleans have any local income tax?
No — New Orleans has no city or parish income tax. Louisiana's constitution did not permit local income taxes, and the statewide income tax abolition at the constitutional level also removes any basis for local income taxes. New Orleans residents pay: federal income tax, Louisiana sales tax (5%), New Orleans city/parish sales tax (5%), and property tax. There is no additional layer of New Orleans city income tax as exists in New York City (3.876%), Baltimore, Philadelphia, or many Ohio cities.
Q
What about Louisiana for business owners — is the corporate tax gone too?
Louisiana's corporate income tax was not abolished — it was reformed to a flat rate. The old progressive corporate rates (ranging up to 7.5%) were replaced with a flat 5.5% corporate income tax rate. Franchise tax was also eliminated. For small business owners operating as sole proprietors or pass-through entities (LLCs, S-corps), the income tax abolition is complete — their business income flows to their personal return where it is now $0 Louisiana tax. For C-corps operating in Louisiana, the 5.5% flat corporate rate applies.
Q
How does the higher sales tax affect food and essential purchases?
Louisiana exempts most groceries from state sales tax. Unprepared food items (food bought at grocery stores for home preparation) are exempt from the Louisiana state sales tax of 5%. However, some parish-level sales taxes do apply to groceries in certain jurisdictions. In New Orleans, prepared food (restaurants, takeout) is subject to the full combined sales tax. The food exemption softens the regressive impact of Louisiana's high sales tax rate, though Louisiana still has a higher effective sales tax burden than most states even on non-food spending.
Disclaimer:This guide provides general tax information for educational purposes only. Louisiana's income tax abolition took effect January 1, 2025. Property tax millage rates and sales tax rates vary by municipality and change annually. This is not tax advice. Consult a CPA for Louisiana-specific tax planning.