State Income Tax Changes for 2026: Who Cut, Who Raised, and What It Means
Updated 2026-10-03 · Reviewed against official government sources
Eight states cut income tax rates on January 1, 2026 under laws already on the books: Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio and Oklahoma. Five more passed cuts during 2026 sessions and made them retroactive to January 1: Arkansas, Georgia, South Carolina, Utah and West Virginia. Maine went the other direction with a new surcharge on million-dollar incomes. Here's every change with the old and new rates, and a quick way to estimate your savings.
Rate cuts that took effect January 1, 2026
These were scheduled under earlier laws or revenue triggers, so withholding tables changed with the first paycheck of the year.
| State | 2025 rate | 2026 rate | What changed |
|---|---|---|---|
| Indiana | 3.00% flat | 2.95% flat | Next step: 2.9% in 2027 |
| Kentucky | 4.00% flat | 3.50% flat | Revenue-trigger cut on the path toward elimination |
| Mississippi | 4.40% flat | 4.00% flat | First $10,000 still exempt; further phase-down scheduled |
| Montana | 5.90% top | 5.65% top | Lower 4.7% bracket unchanged; top falls to 5.4% in 2027; state EITC rises to 20% of federal |
| Nebraska | 5.20% top | 4.55% top | Phasing down to 3.99% in 2027 |
| North Carolina | 4.25% flat | 3.99% flat | Final scheduled step of the phase-down |
| Ohio | 3.125% top | 2.75% flat | Flat rate on nonbusiness income over $26,050 |
| Oklahoma | 4.75% top | 4.50% top | Six brackets consolidated into three |
Cuts passed in 2026 and applied retroactively
Employers switched to new withholding tables partway through the year. Because withholding was too high for the first months of 2026, many workers in these states will see a bigger refund next spring.
| State | Old 2026 rate | New 2026 rate | Law |
|---|---|---|---|
| Arkansas | 3.90% top | 3.70% top | May 2026 special session (HB 1001 / SB 1) |
| Georgia | 5.19% flat | 4.99% flat | 2026 accelerated cut; triggers could reach 3.99% |
| South Carolina | 6.00% top | 5.21% top | H. 4216; brackets consolidated; future cuts toward 1.99% if revenue targets are met |
| Utah | 4.50% flat | 4.45% flat | S.B. 60 (sixth straight annual cut) |
| West Virginia | 4.82% top | 4.58% top | SB 392, a 5% across-the-board cut |
Tax increases and new taxes
- Maine: a 2% surcharge on Maine taxable income above $1 million (single), $1.5 million (joint and head of household), or $750,000 (married filing separately), effective for tax years starting January 1, 2026.
- Maryland: two new top brackets (6.25% on income over $500,000 and 6.5% over $1 million, single) took effect retroactively for 2025 and continue in 2026. The maximum county rate rose to 3.30% starting in 2026.
- Hawaii: a new 13% bracket on very high incomes was enacted in 2026 but doesn't start until tax year 2027.
- Washington: a 9.9% tax on income above $1 million was enacted in March 2026 and starts January 1, 2028.
How much does a rate cut save you?
For a flat-tax state, multiply your state taxable income by the change in rate. A North Carolina single filer with $60,000 in wages has $47,250 of taxable income after the $12,750 standard deduction. The 0.26-point cut (4.25% → 3.99%) saves about $123 a year, roughly $4.70 per biweekly paycheck.
A Georgia filer with $70,000 of taxable income saves 0.20% × $70,000 = $140. In Kentucky the half-point cut is bigger: $55,000 of taxable income saves $275. In South Carolina, where the top rate dropped by 0.79 points, a household with $100,000 of taxable income saves several hundred dollars. The exact amount depends on the new bracket thresholds.
These cuts are real, but on a typical income they're small next to federal income tax and FICA. Use the paycheck calculator for your state to see your 2026 take-home pay with the new rates.
Other 2026 changes worth knowing
- Social Security: West Virginia completed its phase-out, so benefits are fully exempt for 2026. Michigan lets filers born after 1952 who are 67+ claim both the standard deduction and the Social Security subtraction for 2026–2028.
- Michigan retirement income: the four-year phase-in of the pension and retirement subtraction is complete for 2026.
- Groceries: Illinois ended its 1% statewide grocery tax on January 1, 2026, though many localities added their own. Arkansas repealed its state-level grocery tax.
- New York: middle-class rate cuts lower the first five brackets for 2026 (for example 5.5% → 5.4%), and the Empire State child credit rises to as much as $1,000 for the youngest children.
Flat-tax cuts side by side: savings on $50,000 of taxable income
In a flat-tax state, the saving is simply the rate cut times your state taxable income. The table applies each 2026 cut to $50,000 of state taxable income, so you can compare states directly. In graduated states like Nebraska, Montana, Oklahoma, Arkansas, South Carolina and West Virginia, the saving depends on how much of your income falls in the brackets that changed, so they aren't listed.
- Mississippi's first $10,000 is exempt, so the cut applies to $40,000 of the $50,000.
- Georgia's and Utah's figures compare the rate in effect at the start of 2026 with the lower rate enacted later and applied back to January 1.
- Indiana and Utah residents may also pay local or county income taxes, which these cuts don't touch.
| State | 2025 rate | 2026 rate | Yearly saving on $50,000 | Per biweekly paycheck |
|---|---|---|---|---|
| Kentucky | 4.00% | 3.50% | $250 | $9.62 |
| Mississippi | 4.40% | 4.00% | $160 | $6.15 |
| North Carolina | 4.25% | 3.99% | $130 | $5.00 |
| Georgia | 5.19% | 4.99% | $100 | $3.85 |
| Indiana | 3.00% | 2.95% | $25 | $0.96 |
| Utah | 4.50% | 4.45% | $25 | $0.96 |
What "retroactive to January 1" means for you
When a state cuts its rate partway through the year and makes it retroactive, your total 2026 tax is figured at the new rate. Your paychecks, though, were withheld at the old rate until your employer loaded the new tables. The difference doesn't vanish. It comes back when you file your 2026 state return in early 2027, as a larger refund or a smaller balance due.
Take a Georgia worker with $70,000 of taxable income whose employer switched tables after six months. Half a year of withholding at 5.19% instead of 4.99% means about $70 too much was withheld, and that amount is refunded at filing. You don't need to do anything to get it, as long as your W-2 state withholding is right and you file a state return.
- Check a late-2026 pay stub. State withholding per check should be a little lower than in January for the same gross pay.
- If you make state estimated payments, you can reduce the remaining ones to reflect the new rate.
- Rate cuts don't change payroll premiums or local taxes, and federal tax is unaffected.
Related calculators & guides
Frequently asked questions
How many states cut income taxes in 2026?
Thirteen states lowered rates for tax year 2026: eight on January 1 under existing law (IN, KY, MS, MT, NE, NC, OH, OK) and five through 2026 legislation made retroactive to January 1 (AR, GA, SC, UT, WV).
What is Ohio's income tax rate in 2026?
Ohio has a flat 2.75% on nonbusiness income over $26,050. Income below that is taxed at 0%. Most Ohio cities add their own municipal income tax, commonly 1%–2.5%.
What is North Carolina's tax rate for 2026?
3.99% flat, down from 4.25% in 2025. This is the final scheduled step in the state's phase-down.
Will I get a bigger refund because of a retroactive cut?
Probably, if you live in Arkansas, Georgia, South Carolina, Utah or West Virginia. Withholding before the new tables took effect was based on the higher rate, so the difference is credited when you file.
Did any state raise income taxes for 2026?
Maine added a 2% surcharge on income over $1 million (single). Maryland's new top brackets from 2025 continue, and its county rate cap rose to 3.30%. Hawaii's and Washington's new high-earner taxes start in 2027 and 2028.
How much will Kentucky's 2026 rate cut save me?
Half a percentage point of your Kentucky taxable income. On $50,000 that is $250 a year, about $9.62 per biweekly paycheck.
Do state rate cuts lower my city or county income tax?
No. Local income taxes, such as Kentucky occupational taxes, Indiana county taxes or Ohio municipal taxes, are set separately and are not affected by a state rate cut.
Do I need to file anything to get the retroactive cut?
No special form. File your 2026 state return as usual. The tax is figured at the new rate, and any extra withheld earlier in the year is refunded or credited.
Sources
Figures are taken from official government publications and were last reviewed on 2026-10-03.