While the adage “nothing is certain but death and taxes” remains popular, 2025 will bring some relief for taxpayers in nine states, as income tax rates are set to drop, according to the Tax Foundation, a nonprofit focused on tax policy research.
Among the states with new tax cuts, Iowa and Louisiana are implementing major changes. Both states are transitioning from a tiered income tax system to a flat-tax structure. South Carolina, although not part of the nine states with income tax cuts, has made a temporary tax reduction permanent and is gradually lowering its top marginal rate.
A total of 39 states will make adjustments to their tax codes in 2025, including income tax rate reductions in nine states. The most significant federal tax question remains whether changes made under the 2017 Tax Cuts and Jobs Act, which include individual tax cuts, will expire as scheduled at the end of 2025 unless Congress intervenes.
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For those who owe over $10,000 in taxes, finding the right Tax Relief firm can make a significant difference.
Here are the nine states that will be cutting their income taxes in 2025:
- Indiana – Lowering its 3.05% flat tax to 3%.
- Iowa – Shifting from a bracket-based system with a top rate of 5.7% to a flat 3.8% tax.
- Louisiana – Replacing its top rate of 4.25% with a 3% flat tax.
- Mississippi – Reducing its flat income tax from 4.7% to 4.4%.
- Missouri – Lowering its top marginal tax rate from 4.8% to 4.7%.
- Nebraska – Dropping its top marginal tax rate from 5.84% to 5.2%.
- New Mexico – Adding a new income tax bracket while lowering taxes for low- and middle-income residents. For example, a couple earning $50,000 could save over $300 in taxes.
- North Carolina – Reducing its tax rate from 4.75% to 4.5%.
- West Virginia – Lowering its top marginal rate from 5.12% to 4.82%.
Income tax rates vary significantly across the country, with states like North Dakota having a top rate of 2.5%, while California has one of the highest at 13.3%. Nine states, including Alaska, Florida, Nevada, and Texas, don’t charge individual income taxes. However, these states may offset the lack of income taxes with higher sales or property taxes, so it’s important to consider the overall tax burden.
For those looking to move to a more tax-friendly state, the Tax Foundation also ranks the top 10 states with the most favorable tax policies.
If you owe over $10,000 in taxes, consider seeking professional help for tax relief.
