Nine U.S. states will implement reductions in their income tax rates beginning January 1, 2026, according to an analysis by the Tax Foundation. This trend follows a period during the pandemic when many states experienced budget surpluses due to federal aid, prompting discussions around tax cuts. Proponents assert that these reductions may enhance economic growth and competitiveness, while organizations such as the Center on Budget and Policy Priorities caution that lowering or eliminating state income taxes could hinder funding for essential public services, including education.

The states implementing these tax cuts include:

**Georgia**: The income tax rate will decrease from 5.19% to 5.09% in 2026, with plans for further reductions until it reaches 4.99%. This initiative is supported by a Republican-controlled legislature and governor.

**Indiana**: The flat-rate income tax will drop from 3% to 2.95% in 2026, with an additional reduction to 2.9% planned for 2027. This measure was enacted by the Republican-led state legislature.

**Kentucky**: The income tax rate will be reduced from 4% to 3.5% as part of a 2022 law that allows for annual reductions based on specific fiscal conditions. The state has a Republican majority in the legislature and a Democratic governor.

**Mississippi**: The tax rate will decrease from 4.4% to 4% in 2026, with a goal of reaching 3% by 2030, following legislation signed by Republican Governor Tate Reeves.

**Montana**: The top marginal tax rate will be lowered from 5.9% to 5.65% in 2026, with further reductions planned. The state legislature is controlled by Republicans.

**Nebraska**: The income tax rate will fall from 5.2% to 4.55%, with a target of 3.99% by 2027. Despite a significant budget shortfall, some lawmakers are advocating for continued tax cuts.

**North Carolina**: The income tax rate will decrease from 4.25% to 3.99%. The state has a Democratic governor and a Republican-controlled legislature.

**Ohio**: The income tax will be reduced to a flat rate of 2.75% for nonbusiness income over $26,050, as part of a budget bill supported by the Republican majority.

**Oklahoma**: The top marginal tax rate will decrease from 4.75% to 4.5%, and the state will consolidate its income tax brackets from six to three.

Additionally, taxpayers may see further savings due to recent tax legislation that raised the cap on the state and local tax deduction (SALT) from $10,000 to $40,000, potentially benefiting middle- and upper-middle-income households significantly. Financial services firm Piper Sandler estimates that taxpayers could receive refunds approximately one-third larger than usual, averaging around $1,000 more per filer.