By Gao Yun
According to a new analysis released by the Tax Foundation, nine U.S. states will reduce personal income tax rates beginning Jan. 1, 2026. The changes are expected to ease the tax burden for some residents in the coming year and provide additional financial flexibility.
CBS reported that the Tax Foundation said the latest round of tax cuts is not an isolated move but part of a longer-term trend that began during the COVID-19 pandemic. At that time, large-scale federal aid significantly boosted state revenues, creating the fiscal conditions and political momentum for personal income tax reductions.
Supporters say lower personal income taxes can help stimulate economic growth and improve states’ competitiveness. Some groups, including the nonpartisan Center on Budget and Policy Priorities (CBPP), caution that continued cuts or the elimination of state income taxes could reduce funding for public services such as education.
Tax Foundation data show that as of October this year, nine states already do not levy a personal income tax. These states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, Tennessee, and New Hampshire.
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Below are the nine states identified by the Tax Foundation that will lower personal income tax rates in 2026, along with details of the changes.
Georgia
In Georgia, where Republicans control both chambers of the state legislature as well as the governor’s office, the personal income tax rate will be reduced to 5.09 percent in 2026, down from 5.19 percent in 2025.
According to WABE, Atlanta’s NPR affiliate, Georgia plans to cut the personal income tax rate by 0.10 percentage points each year until it reaches 4.99 percent. The report noted that some state lawmakers have advocated eliminating the state income tax entirely.
Indiana
In Republican-led Indiana, a budget bill passed by the state legislature in 2023 provides that the state’s flat personal income tax rate, which applies uniformly regardless of income level, will fall from 3 percent to 2.95 percent at the start of 2026. The rate is scheduled to drop further to 2.9 percent in 2027.
Kentucky
Kentucky’s personal income tax rate will be reduced from 4 percent to 3.5 percent on Jan. 1, 2026.
Louisville Public Media reported that the change stems from legislation passed in 2022 that established a “trigger mechanism.” Under the law, income tax rates are lowered when the state meets specific benchmarks for revenue, spending, and budget reserve funds.
Republicans currently hold a majority in the Kentucky legislature, while the governor is a Democrat.
Mississippi
Mississippi’s personal income tax rate will be reduced from 4.4 percent in 2025 to 4 percent beginning Jan. 1, 2026. The Tax Foundation said this marks the final phase of a multi-year tax reduction plan.
In addition, Republican Governor Tate Reeves signed new legislation in March. Under the law, Mississippi plans to reduce the income tax rate to 3 percent by 2030 and allows for continued annual reductions until the rate reaches zero.
Montana
Legislation passed by the Montana legislature this year provides that the state’s top marginal tax rate will be reduced from 5.9 percent to 5.65 percent in 2026, with a further cut to 5.4 percent in 2027. The law also expands the number of taxpayers eligible for the lowest tax bracket.
Montana is currently under unified Republican control, with the party holding the governor’s office and both chambers of the legislature.
Nebraska
In Republican-led Nebraska, the personal income tax rate will be lowered from 5.2 percent to 4.55 percent starting Jan. 1, 2026. The Tax Foundation said the move is part of a longer-term plan aimed at reducing the rate further to 3.99 percent by 2027.
However, CBPP data show that while Nebraska recorded a $1.9 billion budget surplus in 2023, it is now facing a projected budget shortfall of $432 million. Some lawmakers have called for a pause in further income tax cuts to ease fiscal pressure.
North Carolina
In North Carolina, where the governor is a Democrat and the state legislature is controlled by Republicans, the personal income tax rate will be reduced from 4.25 percent to 3.99 percent in 2026.
North Carolina operates a flat personal income tax system, applying the same rate to all residents regardless of income level.
Ohio
The Tax Foundation said Ohio passed a major budget bill this year that lays the groundwork for adopting a flat personal income tax rate. Under the new system, non-business income above $26,050 will be taxed at a flat rate of 2.75 percent, down from the current top rate of 3.125 percent.
Following passage of the budget, the Ohio House of Representatives said in a statement that the change would make the state more competitive with neighboring states, simplify the tax code, and help drive revenue growth.
Republicans currently hold the governor’s office, as well as the positions of secretary of state and attorney general, and control both chambers of the state legislature.
Oklahoma
In Republican-led Oklahoma, the top marginal personal income tax rate will be reduced from 4.75 percent to 4.5 percent on Jan. 1, 2026. A tax reform bill passed and signed into law earlier this year also consolidated the state’s six income tax brackets into three.
Additional tax relief factors
In addition to state-level changes, U.S. taxpayers may also see further relief from federal tax policy adjustments next year.
This year, Republicans advanced legislation known as the “big, beautiful bill,” which includes raising the cap on state and local tax (SALT) deductions from $10,000 to $40,000.
Financial services firm Piper Sandler estimates the change could increase average tax refunds by about one-third, translating to roughly $1,000 more per filer. The firm said middle-income and upper-middle-income households are expected to benefit the most.
