If you’re feeling whiplash from all the tax-related news lately, you’re not alone. But if you’re also someone with a tight grocery budget and bills beating you over the head, there is one small piece of good news heading into 2026: Income taxes are dropping in nine states. The cuts take effect Jan. 1 and, for some households, could mean a little extra breathing room — emphasis on little.
According to a new analysis from the Tax Foundation, these changes are part of a wave of state-level tax cuts that started during the pandemic, when federal aid left many state budgets flush with cash. Now, some of that money is coming back to taxpayers, at least on paper.
The 9 States Cutting Income Taxes in 2026
Here’s where rates are going down — and by how much:
- Georgia: 5.19% to 5.09%
- Indiana: 3% to 2.95%
- Kentucky: 4% to 3.5%
- Mississippi: 4.4% to 4%
- Montana: 5.9% to 5.65%
- Nebraska: 5.2% to 4.55%
- North Carolina: 4.25% to 3.99%
- Ohio: 3.13% to 2.75%
- Oklahoma: 4.75% to 4.5%
Most of these reductions are modest — fractions of a percentage point — but they can still add up over the course of a year, especially for middle-income households.
What ‘Tax Cut’ Really Means Here
Before you start planning a vacation with your newfound savings, it’s worth setting expectations. For many people, these cuts will translate to tens or a few hundred dollars a year, not thousands. Is it slightly helpful? Sure. Is it life-changing? Probably not.
Several states are using trigger-based systems, meaning future cuts depend on revenue targets and budget health. Others are steadily moving toward flatter or lower rates over time, sometimes with the long-term goal of eliminating income taxes altogether. Supporters argue that lower taxes make states more competitive and leave people with more money to spend. Critics warn the cuts could eventually squeeze funding for public services like schools, infrastructure, and health programs.
Why This Is Happening Now
State budgets ballooned during the pandemic thanks to federal relief funds and strong tax collections. That gave lawmakers political and financial cover to push through tax cuts, many of which are now taking effect.
At the same time, inflation hasn’t exactly been easy on household budgets. Groceries, rent, insurance, and utilities are still eating up a larger share of income than they did a few years ago. In that context, even a small tax cut can feel like a win, or at least a break in the pressure.
Will You Actually Feel It?
How this impacts you depends on where you live, how much you earn, and whether other costs keep climbing (spoiler: they probably will). A lower income tax rate doesn’t stop property taxes, sales taxes, or insurance premiums from going up. Still, if you’re in one of these nine states, you may notice a slightly smaller bite out of your paycheck starting in January. It’s not a windfall, but in an economy where everything feels more expensive, even a modest rollback can matter.
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