The biggest change in the state income tax return this year will affect about 20 percent of filers and stems from the so-called Stelly plan tax swap.

Carolyn Braud, revenue tax research analyst with the state Department of Revenue and Taxation, says this year, filers get to deduct 57.5 percent of their federal excess itemized deductions.

Next year that percentage will jump to 65 percent and settle at 100 percent for the 2009 tax year and beyond.

Federal excess itemized deductions are the total amount of certain expenses -- such as mortgage interest, charitable contributions and medical costs -- that exceed the standard deduction taken on one's federal income taxes.

When the state Legislature changed the Stelly plan in 2002, it eliminated excess itemized deductions, increasing income tax collections to offset decreases from the elimination of state sales taxes on groceries and home utilities.


But last year the Legislature voted to phase excess itemized deductions back in as part of a larger package of tax breaks. Critics pointed out the change would primarily benefit the wealthy and cost the state 157 million dollars in revenue this year and 300 million a year when fully implemented.