Recently, a analysis conducted by the “Tax Foundation,” a think tank in Washington D.C., revealed that nine states in the United States will lower individual income tax rates starting from January 1, 2026, providing some taxpayers with more financial breathing room.
This tax cut wave follows an initiative that began during the pandemic period, where many states saw significant budget increases due to federal aid, providing additional funds for states to reduce their state-level individual income taxes.
According to data from the Tax Foundation, as of October this year, nine states in the U.S. do not collect any individual income tax at all.
Furthermore, at the federal level, with multiple amendments made to the tax laws by the “One Big Beautiful Bill,” Americans are set to receive the highest tax refunds ever in 2026.
According to the analysis by this non-profit organization, here are the nine states that will be lowering their individual income taxes starting from January 1, 2026:
– Georgia, where the state legislature and governor’s office, both controlled by the tax-cut supporting Republican Party, will decrease the individual income tax rate from 5.19% in 2025 to 5.09% in 2026.
– Indiana, also led by Republicans, will implement a single rate individual income tax reduction from 3% to 2.95% for all taxpayers, irrespective of income levels, at the beginning of next year as per a budget measure passed in 2023. There are plans for further reductions in 2027 to 2.9%.
– Kentucky will reduce its individual income tax rate from the current 4% to 3.5% on January 1. This adjustment stems from a bill passed in 2022 that includes a trigger mechanism to gradually lower the state’s individual income tax as long as specific thresholds in tax revenue, spending, and budget reserves are met.
– Mississippi will see a reduction in the individual income tax rate from 4.4% in 2025 to 4% on January 1, 2026. This marks the final stage of a multi-year tax reduction plan.
– Montana passed a bill this year to lower the highest marginal tax rate from 5.9% in 2026 to 5.65%, and further to 5.4% in 2027. The new law also expands the range of individuals eligible for the lowest tax rate.
– Nebraska, led by Republicans, will decrease the current 5.2% individual income tax rate to 4.55% on January 1, as part of an ongoing tax reduction plan with the rate expected to drop to 3.99% by 2027.
– North Carolina will lower the individual income tax rate from the current 4.25% to 3.99% in 2026. The state applies a single rate for all residents regardless of income levels.
– Ohio’s major budget bill this year paved the way for adjustments to individual income tax. The single tax rate for all non-business income exceeding $26,050 will decrease from the current 3.125% to 2.75%.
– Oklahoma, under Republican leadership, will reduce the highest marginal income tax rate from 4.75% to 4.5% on January 1. Earlier this year, the governor signed a tax reform bill consolidating six income tax brackets into three.
(Source: American Broadcasting Company News Department)