Taxes: 9 States Reducing Individual Income Tax Rates in 2026

Tuesday, 30 December 2025, 14:03

Taxes are changing as nine U.S. states prepare to cut individual income tax rates in 2026. This initiative aims to provide taxpayers with financial relief. Each state's tax cut stems from budget considerations, with many anticipating a positive economic impact while some warn of potential risks to public service funding.

Cbsnews — Taxes: 9 States Reducing Individual Income Tax Rates in 2026

States Cutting Individual Income Taxes in 2026

As we move into 2026, nine U.S. states are set to reduce individual income tax rates. This change is seen as a way to provide some taxpayers with a bit more financial flexibility as they enter the new year. These reductions are primarily a response to budget surpluses created during the pandemic and will be implemented in a staggered manner.

Details of Tax Cuts in Each State

Georgia: The rate will decrease from 5.19% to 5.09%.
Indiana: The flat rate drops from 3% to 2.95%.
Kentucky: The rate will drop from 4% to 3.5%.
Mississippi: The tax will be reduced from 4.4% to 4%.
Montana: The top rate decreases from 5.9% to 5.65%.
Nebraska: The rate will go down from 5.2% to 4.55%.
North Carolina: The income tax rate drops from 4.25% to 3.99%.
Ohio: The rate will decrease to 2.75% for income over $26,050.

These tax changes reflect a significant shift in state financial policies and come with arguments both in favor of and against reducing income taxes.

While proponents argue that these cuts can stimulate economic growth, critics warn of long-term consequences for funding public services such as education and health.

This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.