Louisiana taxes for early retirees: a flat 3%, a bigger deduction, and a 65+ bonus

By Tom, CPA · Updated October 29, 2026

TL;DR: Since 2025 Louisiana taxes income at a flat 3% after a large standard deduction. At 65, each person exempts $12,324 of retirement income for 2026. Social Security is exempt; sales tax is high.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Louisiana threw a tax reform party in late 2024 and the hangover is surprisingly pleasant. Starting in 2025 the state replaced its brackets with a flat 3% income tax, swapped personal exemptions for a much bigger standard deduction, and doubled the retirement income exemption for people 65 and older. Social Security stays exempt.

The trade: personal exemptions, including the extra 65+ exemption, were repealed, and the state sales tax went up. For early retirees under 65, Louisiana is now a cheap flat-tax state. After 65, it gets cheaper. Frugal Fran is thrilled. Lavish Larry asked whether the 3% applies to beignets. It does not; sales tax does.

CPA Warning Label: Louisiana's 65+ exemptions for age and blindness were repealed, so check that old software or guides aren't still claiming them.

The flat 3% rate and the new standard deduction

The Louisiana Department of Revenue says individual income tax is a flat 3% for tax years beginning on or after January 1, 2025. The old personal exemptions and the extra exemptions for age 65, blindness and dependents were replaced with a larger standard deduction, which is adjusted for inflation.

The 2026 amounts come from Revenue Information Bulletin 26-019, issued September 28, 2026, which applied a 2.7% inflation adjustment. Because the 2026 forms aren't out yet, confirm on the state's current forms before filing.

Retirement income: the 65+ exemption

Under R.S. 47:44.1, taxpayers who are 65 or older can exempt a set amount of annual retirement income: $12,000 for 2025 and $12,324 for 2026 after inflation adjustment. It covers pension, annuity and IRA distributions reported on the federal return. On a joint return, each spouse who is 65+ and has retirement income can claim their own exemption, so a couple can exempt up to $24,648 in 2026.

• Social Security: exempt. Federally taxable Social Security is subtracted on the IT-540.
• Louisiana state and local government pensions: many state and local retirement systems are fully exempt under separate rules, as are federal retirement benefits. Check the IT-540 instructions for your plan.
• Under 65: IRA, 401(k) and private pension income is taxed at 3% after the standard deduction.
• Roth conversions: taxed at 3%. A conversion after 65 may qualify for the retirement exemption as IRA income; check the instructions before relying on it.
• Capital gains and dividends: taxed at 3%.

Illustrations

Illustration: Lavish Larry and his wife are both 66 and file jointly for 2026. Assumptions: $40,000 of Social Security, $60,000 of IRA withdrawals ($30,000 from each spouse's IRA), $30,000 of long-term capital gains. Social Security is exempt. Each spouse exempts $12,324 of IRA income, so $60,000 minus $24,648 leaves $35,352. Add $30,000 of gains for $65,352, then subtract the $25,676 standard deduction. Louisiana taxable income is $39,676, and tax at 3% is $1,190.28.

Illustration: Frugal Fran and her husband are both 58 and live on $90,000 of IRA withdrawals and gains in 2026. No 65+ exemption yet. Taxable income is $90,000 minus $25,676, or $64,324. Tax at 3% is $1,929.72. Low enough that Fran stopped complaining and started a gumbo budget.

Louisiana takes about 0.9% of Larry's total income and about 2.1% of Fran's. Before reform, Louisiana used graduated brackets and smaller deductions, so the same households would generally have paid more.

Planning moves for Louisiana retirees

A flat rate makes Louisiana planning refreshingly boring, but a few moves still pay off:

1. Count the standard deduction as a free zone. A married couple can take $25,676 of IRA withdrawals or conversions in 2026 with no Louisiana tax, if they have no other taxable income. That's a decent annual Roth conversion floor.
2. Spread IRA money between spouses after 65. The retirement exemption is per person. If only one spouse has an IRA, the other spouse's $12,324 exemption has nothing to shelter. Annuities and pensions in each name use their own exemptions.
3. A flat rate means no bracket games. Louisiana charges 3% on the first dollar and the millionth dollar above the deduction, so timing a big capital gain doesn't change your Louisiana rate. Focus on the federal brackets instead.
4. Consider the community property rules. Community income is generally split between spouses, which matters more for married couples filing separately and for estate planning than for a joint return.
5. Budget for sales tax. At 5% state plus local, a household spending $80,000 a year on taxable goods can pay more in sales tax than in income tax. That's the real cost of living in Louisiana for many retirees.

Fran's plan: convert $25,000 a year to Roth before 65, then live on IRA money and Social Security after 65 with most of it exempt. Larry's plan involves a boat. We've stopped asking.

Sales tax: where Louisiana makes it back

The state sales tax rate rose to 5% from January 1, 2025, and is scheduled to drop to 4.75% in 2030. Parishes and cities add their own sales taxes on top, and combined rates are among the highest in the country. For retirees who spend most of what they withdraw, sales tax can rival income tax. Fran budgets for it. Larry pretends it doesn't exist, then asks why his boat costs more than the sticker.

Property tax and senior relief

Louisiana's homestead exemption covers the first $7,500 of assessed value of a primary residence. Because homes are assessed at 10% of fair market value, that shelters roughly the first $75,000 of market value from most parish taxes. Homeowners 65 and older can also apply for a special assessment level, which freezes the assessed value of their home as long as household income stays under the limit (currently $100,000). Apply with your parish assessor.

Two constitutional amendments on the November 3, 2026 ballot would expand this. Amendment 6 would authorize an extra exemption of up to $30,000 of assessed value, rising with age, for 65+ homeowners who qualify for the freeze. Amendment 9 would raise the freeze income limit from $100,000 to $150,000. Check the results and your assessor's rules before planning around them.

Estate tax, inheritance tax and residency

Louisiana has no estate tax and no inheritance tax. For federal estate tax, see estate tax basics. Louisiana is a community property state, which affects how assets are titled and passed to heirs, so talk to a Louisiana estate attorney if you move there with significant assets.

Part-year residents pay Louisiana tax on income earned while they lived there. For a move plan, see changing your state residency. Louisiana requires estimated payments if you expect to owe more than $1,000 ($2,000 for joint filers) after credits and withholding, per the IT-540ES instructions. Withholding from IRA distributions is the easy alternative.

How Louisiana compares

For early retirees, Louisiana is now a flat, low-rate state. Texas and Florida have no income tax at all but different property and sales tax tradeoffs, and Georgia has a large retirement exclusion starting at 62. If you're doing a Roth conversion ladder before 65, Louisiana charges 3%, which is cheap insurance against higher taxes later. Keep an eye on the federal tax torpedo, because Louisiana's Social Security exemption doesn't change the federal math.