9 states are cutting individual income taxes in 2026. See if yours is one of them.
As we head into the new year, nine U.S. states are gearing up to lower income taxes on Jan. 1, providing some taxpayers with a welcome financial reprieve. This move comes as part of an ongoing effort that began during the pandemic, when states saw their budgets swell due to federal aid, incentivizing them to trim state income taxes.
Advocates of the tax cuts argue that they can stimulate economic growth and enhance the competitiveness of their states. However, critics, such as the nonpartisan Center on Budget and Policy Priorities, have cautioned that reducing or eliminating state income taxes could hinder investments in crucial public services like education.
According to the Tax Foundation, as of October, nine states had no income tax at all. Let’s take a closer look at the nine states where individual income taxes will be lower starting on Jan. 1, 2026:
Georgia
Georgia, under Republican leadership, will reduce its income tax rate to 5.09% in 2026, down from 5.19% in 2025. The state plans to gradually decrease the income tax rate by 0.10% annually until it reaches 4.99%, with some lawmakers advocating for the complete elimination of the state income tax.
Indiana
In Indiana, also led by Republicans, the flat-rate individual income tax will drop to 2.95% from 3% at the beginning of next year. The rate is set to further decrease to 2.9% in 2027.
Kentucky
Kentucky’s individual income tax rate will be slashed to 3.5% on Jan. 1, down from the current 4%. This reduction is part of a 2022 bill that includes a trigger mechanism to incrementally lower the state’s income tax annually, provided certain financial thresholds are met.
Mississippi
Mississippi will see its individual income tax rate drop from 4.4% in 2025 to 4% in 2026, marking the final phase of a multi-year scheduled reduction. New legislation signed by Governor Tate Reeves aims to reduce the rate to 3% by 2030 and potentially eliminate it altogether.
Montana
A bill passed in Montana will lower the top marginal income tax rate from 5.9% to 5.65% in 2026 and further to 5.4% in 2027. The legislation also expands eligibility for the lowest tax bracket.
Nebraska
Nebraska, governed by Republicans, will see its individual income tax rate decrease to 4.55% from 5.2% starting Jan. 1. This reduction is part of a phased plan that aims to bring the rate down to 3.99% by 2027.
North Carolina
North Carolina, with a Democratic governor and Republican-controlled legislature, will reduce its individual income tax rate from 4.25% to 3.99% in 2026. The state operates on a flat income tax rate system.
Ohio
Ohio’s main budget bill for the year will lower the individual income tax to a flat rate of 2.75% for nonbusiness income over $26,050, down from 3.125%. This move is aimed at enhancing competitiveness, simplifying the tax code, and boosting revenue.
Oklahoma
In Oklahoma, under Republican leadership, the top marginal income tax rate will decrease from 4.75% to 4.5% effective Jan. 1. A recent tax reform measure also consolidated the state’s six individual income tax brackets into three.
