Which states lowered income tax rates in 2026?

States that lowered or restructured income tax for 2026 include Arizona (flattened to 2.5%), Idaho (flattened to 3.0%), Mississippi (flat 4.0%), Nebraska (reduced top rate to 5.84%), and others.

Did any states move to a flat income tax in 2026?

Yes. Arizona moved from a progressive structure to a flat 2.5% rate. Idaho flattened to 3.0%. Mississippi has been flat at 4.0% since 2023. The flat tax movement continues across red states.

Which states have no income tax in 2026?

The nine states with no state income tax are: Alaska, Florida, Nevada, New Hampshire (no wage tax but 5% interest/dividend tax), South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire is phasing out its interest/dividend tax (0% by 2027).

How do 2026 state tax changes affect my paycheck?

State tax changes directly impact your take-home pay. A 1% reduction on $100,000 taxable income saves $1,000/year ($83/month). Use our State-to-State Pay Comparison Calculator to see the impact.

Are SALT deductions affected by state tax changes?

The SALT cap (State and Local Tax) is $10,000 through 2025 and was not extended by Congress. This means high-tax-state residents cannot deduct more than $10,000 in state and local taxes on their federal return, reducing the benefit of state tax increases.

2026 State Tax Rate Changes: Which States Lowered Income Tax

The complete guide to 2026 state tax reforms — flat tax adoption, bracket reductions, and which states are making your paycheck stretch further.

By US Payroll & Tax Research Analyst · Published: June 5, 2026 · Updated: July 12, 2026

State Tax2026 ChangesFlat TaxTax Reform

The 2026 tax landscape has seen continued momentum toward flat tax systems and lower top marginal rates at the state level. Since 2021, more than a dozen states have enacted or begun phasing in reforms to reduce income tax burdens. This guide covers the 2026 changes in detail, with new bracket tables and take-home pay comparisons showing the real-world impact on your paycheck.

Editorial DisclaimerThis article is for educational purposes only and does not constitute tax advice. Sources: Federation of Tax Administrators, Tax Foundation, individual state tax agencies.

The Flat Tax Movement: 2026 Updates

Since 2021, when Arizona, Florida, and Texas led the flat tax charge, 14 states have either adopted or are phasing in a flat income tax. Here's the current state of play for 2026:

States with Flat Income Tax (2026)

State	2026 Flat Rate	Implementation Year
Texas	0% (no income tax)	N/A
Florida	0% (no income tax)	N/A
Washington	0% (no income tax)	N/A
Nevada	0% (no income tax)	N/A
Tennessee	0% (no income tax)	N/A
South Dakota	0% (no income tax)	N/A
Wyoming	0% (no income tax)	N/A
Alaska	0% (no income tax)	N/A
Arizona	2.5%	2024 (fully phased in 2026)
Colorado	4.4% (was 4.5% in 2025)	2020
Idaho	3.0%	2025 (phased from 5.8% in 2021)
Indiana	3.15% (was 3.2% in 2025)	2023
Kansas	3.5% (was 3.9% in 2025)	2023 (phasing to 3.0% by 2027)
Kentucky	4.0% (was 4.5% in 2025)	2024 (phasing to 3.0% by 2028)
Mississippi	4.0%	2023
North Carolina	3.99% (was 4.0% in 2025)	2023 (phasing to 3.0% by 2027)
Utah	4.85% (was 4.95% in 2025)	2023

2026 Changes to Watch

Arizona is the big story for 2026. After a multi-year phase-in, Arizona's flat rate reached its final target of 2.5% in 2026, down from a top marginal rate of 4.5% in 2023. The phase-in included a rebate mechanism for lower-income taxpayers to reduce regressive effects.

Idaho completed its transition to a flat 3.0% rate in 2025. Previously, Idaho had a progressive structure with rates up to 5.8%. The shift saves taxpayers earning $100,000 approximately $2,000/year in state taxes.

Mississippi has maintained its flat 4.0% rate since 2023, making it one of the lowest flat rates among states with an income tax.

States Reducing Progressive Tax Brackets

Even states that haven't adopted a flat tax are reducing rates and restructuring brackets:

State	2025 Top Rate	2026 Top Rate	Change
Nebraska	6.00%	5.84%	−0.16%
Louisiana	3.50%	3.00%	−0.50%
Oklahoma	4.75%	4.50%	−0.25%
South Carolina	6.50%	6.25%	−0.25%
Montana	6.90%	6.50%	−0.40%
Ohio	3.90%	3.50%	−0.40%
Wisconsin	7.65%	7.30%	−0.35%
Minnesota	9.85%	9.85% (no change)	0.00%
California	12.30%	12.30% (no change)	0.00%
New York	10.88%	10.88% (no change)	0.00%

States with No Income Tax (2026)

The nine states with no state income tax continue to be a major draw for workers seeking to maximize take-home pay:

State	Other Taxes to Consider
Alaska	No state sales tax; high local option sales tax in some areas
Florida	7.0% state sales tax (localities add up to 2.5%); 1% intangible tax on certain property
Nevada	6.0% state sales tax + local (avg 8.375%); commerce tax on businesses
New Hampshire	5% interest & dividends tax (phasing to 0% by 2027); 0% wage tax; meals and rooms tax
South Dakota	4.5% state sales tax + local; strong property tax
Tennessee	7.0% state sales tax + local; business excise tax
Texas	6.25% state sales tax + local (up to 8.25%); high property taxes (avg 1.81%)
Washington	6.5% state sales tax + local (avg 10.1%); B&O tax on businesses
Wyoming	4.0% state sales tax + local; mineral severance taxes

Take-Home Pay Impact: $100,000 Earner

Let's compare the take-home pay for a single filer earning $100,000 in various states for 2026:

State	Total Marginal Rate	Net Annual Take-Home	Net Monthly	vs Texas (No Tax)
Texas	22.0%	$68,256	$5,688	—
Florida	22.0%	$68,256	$5,688	$0
Washington	22.0%	$68,256	$5,688	$0
Nevada	22.0%	$68,256	$5,688	$0
Arizona	24.5%	$67,006	$5,584	−$1,250
Idaho	25.0%	$66,762	$5,564	−$1,494
Colorado	26.4%	$66,098	$5,508	−$2,158
Indiana	25.2%	$66,640	$5,553	−$1,616
Kansas	25.5%	$66,494	$5,541	−$1,762
Mississippi	26.0%	$66,192	$5,516	−$2,064
California	34.3%	$63,754	$5,313	−$4,502
New York	32.9%	$64,107	$5,342	−$4,149
New Jersey	32.8%	$64,325	$5,360	−$3,931
Minnesota	31.9%	$64,935	$5,411	−$3,321
Oregon	31.0%	$65,421	$5,452	−$2,835
Hawaii	33.0%	$64,623	$5,385	−$3,633

The SALT Cap: A Critical Consideration

The State and Local Tax (SALT) deduction is capped at $10,000 for 2026 (it was made permanent as part of the Tax Cuts and Jobs Act). This means:

High-tax-state residents cannot deduct more than $10,000 in state and local taxes on their federal return
For a California resident earning $100,000 with $6,000 in state taxes, this isn't an issue (below the cap)
For a California resident earning $500,000+ with $40,000 in state taxes, only $10,000 is deductible
This has reduced the benefit of high state taxes for high earners, making no-tax states more attractive

Looking Ahead: 2027 and Beyond

Several states have multi-year tax reform plans in progress:

Arizona: Evaluating further reductions below 2.5%
Kentucky: Phasing to 3.0% flat rate by 2028
North Carolina: Targeting 3.0% flat rate by 2027
New Hampshire: Phasing out interest/dividend tax entirely by 2027
Iowa: Already adopted flat tax at 3.9% (2026)

FAQ

Which states lowered tax in 2026?

Arizona (2.5% flat), Idaho (3.0% flat), Louisiana (3.0%), Ohio (3.5%), and others. See our full table for all changes.

Did any states adopt flat tax?

Arizona and Idaho completed their flat tax transitions in 2025-2026. 14 states now have flat or zero income tax.

No tax states for 2026?

9 states: AK, FL, NV, NH (0% wage), SD, TN, TX, WA, WY. NH phases out interest/dividend tax by 2027.

How does SALT cap affect taxpayers?

SALT deduction capped at $10,000 permanently. High-tax-state residents cannot fully deduct state taxes, reducing their federal benefit.

How does this affect my paycheck?

A 1% rate reduction on $100K taxable saves $1,000/year. Use our State-to-State Calculator for exact numbers.

Sources & References

Last updated: July 12, 2026.