9 American states to slash individual income tax rates in 2026 — key details revealed
This will be a huge boost for the residents of the states, who have been craving for some relief.
Dec. 31 2025, Published 3:33 a.m. ET
Although Americans have been facing rising costs and economic uncertainty throughout 2025, people in some states will find relief in the new year. On the first day of the new year, nine states in the country will be lowering their individual income tax rates. According to a CBS report, these tax cuts are part of an ongoing effort to make life easier for taxpayers since the pandemic. During the pandemic, states increased their budgets dramatically as they received federal aid, which allowed administrations to cut taxes. However, the flipside to this is that reducing or eliminating state income taxes could stymie investments in public services.
The Republican stronghold of Georgia will be slashing its income tax rate to 5.09% from 5.19% in 2025. The long-term goal of the state is to reduce the tax rate by 0.10% every year until it reaches 4.99%. Some have even advocated removing the state’s income tax completely. Indiana has a single rate applied to all taxpayers regardless of income. That rate will come down from 3% to 2.95% under a budget measure passed by the state legislature in 2023. In 2027, the tax rate is predicted to fall further to 2.9%.
Kentucky has a Republican majority in its state legislature and a Democratic governor. The state will reduce its income tax rate from 4% to 3.5% on January 1. That is a significant drop, and the change comes from a bill that was passed by the state in 2022. Mississippi is also set for a significant cut in income tax rate on January 1. It will decrease from 4.4% to 4%, but that is not all. By 2030, the state hopes to get that rate to 3% through legislation signed by Republican Gov. Tate Reeves. The legislation will also allow the state to cut income tax each year until it is at 0.
Monata will lower its top marginal rate, which is applied to the highest portion of a person's income. The rate will come down from 5.9% to 5.65% in 2026. The plan is to get it down to 5.4% in 2027. Nebraska will also see a significant drop in the income tax rate starting in 2026. The current rate is 5.2%, and it will drop to 4.55%. It is also part of a regulation that will see the income tax rate go down to 3.99% by 2027.
Taxpayers in North Carolina can expect their income tax to come down from 4.25% to 3.99% in 2026. Like Indiana, North Carolina also has a flat income tax rate, irrespective of a person’s income. Ohio's budget bill has been crucial in reducing individual income tax to a flat rate of 2.75% for all non-business income over $26,050, down from 3.125% earlier. Oklahoma is another red state as well, and its residents will see a drop in income tax from 4.75% to 4.5%.
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