Outline:
Certain Americans can begin the new year with the possibility of receiving a reduction in income taxes.
The tax reduction will not be implementedfrom the federal government, but only a few states. Eight states reduced their income tax rate, effective Jan. 1, according to the non-profit thinktankTax Foundation.
Experts stated that by increasing the income of their residents, states aim to boost economic development and draw in more workers, businesses, and capital.
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The segments “show that nations still support changes that will provide them with a competitive advantage andpromote continued economic growth”in the years ahead,” the Tax Foundation stated.
Which states are reducing their income tax rates?
Tax rates are decreasing in these states:
- IndianaThe flat rate has decreased to 2.95% from 3% in the previous year, and it will be reduced further to 2.9% on January 1, 2027. Legislation from last year mandates that the flat individual income tax rate be lowered to a possible 2.55% in 0.05% steps during even-numbered years starting January 1, 2030, contingent upon meeting revenue targets.
- Kentucky: The flat rate decreases to 3.5% from 4%
- Mississippi: The flat rate is reduced to 4% from 4.4% as the last cut, as part of a planned multi-year reduction in the individual income tax.
- MontanaThe top marginal tax rate decreases to 5.65% from 5.9%, with an additional drop to 5.4% planned for 2027. The lower rate of 4.7% stays the same, although the income range eligible for this rate is broadened.
- NebraskaTop rate decreases to 4.55% from 5.2% as part of a continuous reduction process aimed at gradually lowering the top rate to 3.99% by 2027.
- North Carolina: The flat rate decreases to 3.99% from 4.25%, signifying the last reduction in a long-term initiative to lower the individual income tax rate.
- Ohio: Shifts to a flat 2.75% rate from 3.125% on earnings exceeding $26,050. No tax is applied to income under this limit.
- OklahomaTop rate drops to 4.5% from 4.75%, and six individual income tax brackets are consolidated into three brackets.
Medora Lee works as a financial news and personal finance reporter for USA TODAY. You can contact her atmjlee@ and Sign up for our free Daily Money newsletterdaily personal finance advice and business updates from Monday to Friday.
This piece first was published on USA TODAY:8 states reduced income tax rates on January 1. Is your state among them?