8 States Cut Income Tax in 2026: What Your Paycheck Gains
Eight states cut income tax rates in 2026. Here's what each cut is worth per biweekly paycheck, why Ohio's is $0 for most workers, and Georgia's catch.
This article is general information, not tax or financial advice. Tax rules change, individual situations vary, and every figure here is an estimate. Confirm specifics with a qualified tax professional before making money decisions.
The 8 states that cut income tax on January 1, 2026
Every roundup published in December listed the new rates. Almost none of them worked out what those rates are worth in dollars.
Eight states lowered their individual income tax rates effective January 1, 2026. A ninth, Georgia, cut its rate too, but the story there is different enough that it gets its own section below.
| State | 2025 rate | 2026 rate | What changed |
|---|---|---|---|
| Indiana | 3.00% flat | 2.95% flat | Flat rate step-down; falls again in 2027 |
| Kentucky | 4.00% flat | 3.50% flat | Revenue-trigger reduction (HB 1) |
| Mississippi | 4.40% | 4.00% | Applies above $10,000 of taxable income |
| Montana | 5.90% top | 5.65% top | Lower 4.7% bracket widened (HB 337) |
| Nebraska | 5.20% top | 4.55% top | Four brackets collapsed into three |
| North Carolina | 4.25% flat | 3.99% flat | Scheduled reduction under 2023 law |
| Ohio | 3.125% top | 2.75% flat above $26,050 | Top bracket eliminated (HB 96) |
| Oklahoma | 4.75% top | 4.50% top | Six brackets collapsed into three (HB 2764) |
Rates per the Tax Foundation’s 2026 state tax change and rate-schedule reports. Georgia’s 5.19% moved to 4.99%, with a catch worth reading about.
What the cut is worth per paycheck
Here is the number the rate tables leave out. The figures below estimate the extra take-home dollars per biweekly paycheck for a single filer with no dependents, salary only, comparing the 2025 rate schedule against the 2026 schedule.
| State | $40k | $60k | $80k | $100k | $150k |
|---|---|---|---|---|---|
| Indiana | $0.75 | $1.13 | $1.52 | $1.90 | $2.87 |
| Kentucky | $7.05 | $10.89 | $14.74 | $18.58 | $28.20 |
| Mississippi | $3.34 | $6.42 | $9.49 | $12.57 | $20.26 |
| Montana | $1.29 | $10.52 | $13.76 | $15.68 | $20.49 |
| Nebraska | $1.54 | $5.98 | $10.98 | $15.98 | $28.48 |
| North Carolina | $2.73 | $4.73 | $6.73 | $8.73 | $13.73 |
| Ohio | $0.00 | $0.00 | $0.00 | $0.00 | $6.95 |
| Oklahoma | $4.15 | $6.07 | $8.00 | $9.92 | $14.73 |
Multiply by 26 for the annual version. Across the salary range shown, that works out to roughly $183 to $733 a year in Kentucky, $40 to $740 in Nebraska, $34 to $533 in Montana, $87 to $527 in Mississippi, $108 to $383 in Oklahoma, $71 to $357 in North Carolina, $20 to $74 in Indiana, and $0 to $181 in Ohio.
How these were calculated, and what they are not. These are modeled estimates, not figures published by any state. They assume a single filer taking the state standard deduction and personal exemption, 26 biweekly pay periods, and no local income tax. To isolate the effect of the rate change itself, 2026 deduction and exemption amounts are held constant across both years. Nebraska’s row is the roughest of the set, because its 2025 brackets were inflation-indexed and shift the comparison slightly.
Two more things worth knowing before you hold your stub up against this table. First, this is state income tax only. Your federal withholding and your FICA (6.2% Social Security up to the $184,500 wage base, plus 1.45% Medicare) are set federally, and they didn’t move just because your state cut its rate.
Second, withholding formulas approximate your annual liability rather than matching it exactly. North Carolina’s percentage method, for example, withholds at 4.09% rather than the statutory 3.99%, specifically to absorb the standard deduction. So the change on your check can differ a little from the change in what you actually owe.
Ohio’s flat tax: a big headline, a $0 paycheck change for most workers
Ohio’s 2026 move got the most coverage of the eight. It’s also, for most Ohio workers, worth exactly nothing.
Look at the two schedules side by side. In tax year 2025, Ohio taxed nonbusiness income at 0% up to $26,050, then 2.75% from $26,050 to $100,000, then 3.125% above $100,000. In 2026, it taxes 0% up to $26,050 and 2.75% on everything above.
Notice what didn’t change. The 2.75% rate covering $26,050 to $100,000 is identical in both years. The only thing that moved was the top bracket.
That means a single Ohio filer earning $80,000 sees no state withholding change at all in 2026. Neither does the filer at $60,000, or $40,000. The cut starts doing something only above roughly $100,000 of taxable income, and even at $150,000 it’s worth about $181 a year, or roughly $6.95 per biweekly check.
There is a timing wrinkle on top of it. Ohio’s updated withholding tables took effect October 1, 2025, ahead of the statutory January 1 change. Ohio workers who were going to see a difference mostly saw it in the fall of 2025, not in their January stub.
This is the one row in the table where the $0.00 is not a modeling artifact. It holds regardless of which assumptions you pick, because the middle-bracket rate is the same number in both years.
Why your check may not have changed yet (or at all)
A rate change on January 1 doesn’t automatically mean a bigger check on January 1. Three separate things have to line up.
Payroll has to load the new tables. State revenue departments publish revised withholding formulas, then employers and payroll providers implement them. That gap is usually short, but it isn’t zero, and it explains most “my state cut taxes and nothing happened” complaints in January.
The law itself can arrive late. Georgia is the 2026 case study. HB 111 had set the rate at 5.19% with gradual step-downs. Then HB 463, signed May 11, 2026, cut the rate straight to 4.99% retroactive to January 1, 2026, raised the standard deduction to $15,000 single and $30,000 married filing jointly, and scheduled further 0.125-point annual decreases toward 3.99%.
The Georgia Department of Revenue did not publish the revised Employer’s Withholding Guide until June 2026. Employers withheld at 5.19% for roughly the first five months of the year, and payroll providers phased the new rate in over subsequent pay periods. Georgia workers are getting their 2026 savings as a larger refund in early 2027, not as bigger checks through the year.
Your state withholding certificate may have changed. Montana replaced its state allowance system with a method keyed to the federal standard deduction ($16,100 single, $32,200 married filing jointly for 2026) and reissued Form MW-4. If your form is out of date, your withholding may not reflect what the new formula intends.
Withholding is only a prepayment. Anything over-withheld while your employer was still on the old rate comes back at filing as a bigger refund or a smaller balance due, so the money is delayed rather than lost. If your check moved in the wrong direction entirely, why your paycheck got smaller walks through the usual culprits.
The offsets: county taxes, deductions, and what didn’t change
A state rate cut is one line in a longer equation, and a few states pushed other lines in the opposite direction.
Indiana’s county taxes can swallow the whole cut. The state rate fell 0.05 points, from 3.00% to 2.95%, worth about $1.13 per biweekly check at $60,000. Six Indiana counties raised their local income tax rates effective January 1, 2026. In several of them, the local increase exceeds the state reduction, so total withholding went up. No national roundup mentioned this.
Nebraska and Montana amplified their cuts with structure changes. Nebraska collapsed four brackets into three (2.46%, 3.51% and 4.55%), which does more than the top-rate number suggests for middle earners. Montana widened its 4.7% lower bracket to $47,500 single, $95,000 married filing jointly and $71,250 head of household, which is why Montana’s per-check gain jumps so sharply between $40k and $60k.
Mississippi’s cut only touches income above $10,000. The first $10,000 of taxable income is untaxed, so the 4.40% to 4.00% change applies to the remainder.
Kentucky has a trap for multi-employer workers. Kentucky’s withholding formula applies a single standard deduction. If you work two jobs, both employers apply it, and you end up under-withheld by about $117.60 for the year unless you adjust. Worth checking if you have a second job or side income.
And the biggest non-change: none of this touched your federal tax. The federal brackets, the standard deduction and both FICA rates are the same whether your state cut, raised or froze its rate. If you want to see how the pieces stack up, what percent of your paycheck goes to taxes breaks down the full split.
How to check your own number
The table above is an estimate for a generic single filer. Your actual number depends on your filing status, your W-4, your pre-tax deductions and your county. Here is how to find it in about five minutes.
Pull up your most recent pay stub and find the state income tax withholding line (it is usually labeled with your state’s abbreviation, separate from federal and FICA). Then pull a stub from December 2025 with the same gross pay. The difference between those two state lines is your actual, real-world answer.
If the two numbers are identical and you expected a change, check your state against the timing issues above before assuming your employer got it wrong.
To model it rather than wait for a stub, the Salary Calculator app (Stub44) runs full federal, state and FICA math for all 50 states plus DC, using per-state withholding rules rather than a single blended rate. Save two profiles, one at your old state rate and one at the new one, and compare net pay side by side. The period grid shows the result across weekly, biweekly, semimonthly and monthly pay at once, which matters when the difference is a dollar or two a check and rounding would otherwise hide it.
If you are weighing a move rather than a rate change, the state relocation take-home comparison and remote work state tax tools handle those cases directly, and relocating and state taxes covers the decision framing. You can also download Salary Calculator and check your own state in a minute.
What’s already scheduled for 2027
Most of these cuts are phase-downs rather than one-time events, so put a note in your calendar for next January.
Indiana is scheduled to fall to 2.90% and Mississippi to 3.75%. Nebraska’s top rates are set to reach 3.99%, Montana’s top rate 5.40%. Georgia continues its 0.125-point annual decreases toward an eventual 3.99%.
Several of these depend on revenue triggers: the reduction happens only if state collections hit statutory targets. Kentucky, Georgia and Oklahoma all have some version of that condition attached, so treat the 2027 numbers as scheduled rather than settled.
The reliable move is the same one as this year. Compare your January stub to your December stub, and if the state line didn’t move the way you expected, work back through the timing checklist above.
Frequently Asked Questions
Which states cut income tax rates in 2026?
Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio and Oklahoma cut their income tax rates effective January 1, 2026. Georgia also cut its rate to 4.99%, but the law passed in May 2026 and applies retroactively to January 1.
How much more will I take home if my state cut income tax?
Roughly $1 to $28 per biweekly paycheck, depending on your state and salary. Kentucky and Nebraska deliver the largest increases at higher salaries, while Indiana and Ohio deliver the smallest. These are estimates of the state income tax change only.
My state cut income tax but my paycheck looks the same. Why?
Your employer's payroll system has to load the state's new withholding tables before your check changes, and that can lag the effective date. In Georgia the law passed mid-year, so the savings arrive at filing instead. In Ohio, most workers genuinely see no change because the rate on their income was already 2.75% in 2025.
Does Ohio's new flat tax lower my paycheck withholding?
Only if your taxable income is above roughly $100,000. Ohio already taxed income from $26,050 to $100,000 at 2.75% in 2025, so the 2026 change only affects the old top bracket.
Do these state cuts change my federal tax or FICA withholding?
No. Federal brackets, the $16,100 single and $32,200 married filing jointly standard deduction, and the 6.2% Social Security and 1.45% Medicare rates are set at the federal level and are unaffected by a state rate cut.
Will I get money back for the months my employer withheld at the old rate?
Yes, at filing. Over-withholding is not lost; it comes back as a larger refund or a smaller balance due. That is exactly what Georgia workers can expect in early 2027.
Can my total tax go up even though my state cut its rate?
Yes. Six Indiana counties raised their local income tax rates on January 1, 2026, and those increases can exceed the 0.05-point state cut, so some Indiana workers saw total withholding rise.
Which states are cutting income tax again in 2027?
Indiana is scheduled to drop to 2.90%, Nebraska's top rates to 3.99%, Montana's top rate to 5.40% and Mississippi to 3.75%. Georgia is scheduled to continue 0.125-point annual steps toward 3.99%. Some of these reductions depend on state revenue targets being met.