Six states cut income taxes effective January 1, 2026. And the headline is Ohio, which didn't just lower a rate — it tore out the entire progressive structure and replaced it with a single flat rate of 2.75%.
That's a bigger deal than it sounds. Ohio had a progressive income tax for decades. Multiple brackets, rates climbing as income rose. Gone. Every dollar of taxable income now gets taxed at the same 2.75%, full stop.
But Ohio wasn't alone. North Carolina dropped below 4% for the first time in state history. Indiana inched down to 2.95%. Mississippi continued its march toward full elimination. Georgia and Oklahoma both trimmed rates as part of longer phasedown plans.
Altogether, six states are cheaper to earn a paycheck in starting this year. Here's the full breakdown — what changed, what you'll actually pay, and whether any of it matters for relocation decisions.
Ohio Went Flat at 2.75%
This is the one worth talking about.
Ohio passed HB 96, which replaced the state's tiered bracket system with a single 2.75% flat rate, effective January 1, 2026. At the same time, the state raised the standard deduction to $26,050 for single filers — a substantial increase that removes a significant chunk of income from taxation entirely.
Here's what that means in dollars:
| Gross Income | Taxable Income (after $26,050 deduction) | Ohio Tax at 2.75% |
|---|---|---|
| $40,000 | $13,950 | $384 |
| $60,000 | $33,950 | $934 |
| $100,000 | $73,950 | $2,034 |
| $150,000 | $123,950 | $3,409 |
| $200,000 | $173,950 | $4,784 |
Computed using Ohio's 2026 flat rate of 2.75% and $26,050 standard deduction. Single filer. Does not include local income taxes, which vary by city.
The lower end of the income range benefits most from the big standard deduction. A household earning $40,000 only owes $384 in Ohio state income tax all year. That's lower than almost every other state with an income tax.
Honest observation: Ohio's old top rate was already coming down through prior legislation. But moving to a flat structure has a real psychological and planning effect. No bracket management, no worry about which rate applies to the next raise. Just 2.75% on everything above $26,050.
One thing to keep in mind — Ohio cities can layer their own municipal income taxes on top of this. Columbus charges 2.5%, Cleveland 2.5%, Cincinnati 1.8%. So if you live in a major Ohio city, the effective rate is higher than the flat state rate suggests. But that's not new for 2026.
North Carolina Breaks Below 4%
North Carolina's flat income tax rate dropped from 4.5% to 3.99% on January 1, 2026. It doesn't look like much — half a percentage point. But this marks the first time North Carolina's income tax has ever been below 4%. And it's not stopping here.
The state locked in a multi-year phasedown years ago. The rate is scheduled to keep falling:
- 2026: 3.99%
- 2027: 3.49%
- 2028: 2.99%
- 2029: 2.49% (contingent on revenue benchmarks)
If those benchmarks hold, North Carolina will have a 2.49% flat tax by 2029. That would make it the second-lowest flat-rate income tax state in the country, behind only Indiana.
For now, at 3.99%, the numbers:
| Income | NC Tax at 3.99% |
|---|---|
| $75,000 | ~$2,993 |
| $100,000 | ~$3,990 |
| $150,000 | ~$5,985 |
North Carolina has a relatively low standard deduction ($10,750 single / $21,500 married filing jointly). These figures are approximate effective tax amounts.
North Carolina's advantage for in-state residents is real. But it's competing against no-income-tax neighbors like Tennessee and Florida that draw a lot of the same remote worker and retiree demographic. At 3.99%, it's genuinely competitive with most of the Southeast. At 2.49% by 2029, it would be extraordinary.
Indiana at 2.95%: Approaching No-Tax Territory
Indiana cut its flat rate from 3.05% to 2.95% for 2026. Small move. But context matters: Indiana is now the second-lowest flat income tax rate in the country among states that actually have one, behind only Arizona (2.5%).
At $100,000 income, Indiana residents pay roughly $2,950 in state income tax. For comparison, Ohio at 2.75% with the $26,050 standard deduction comes out to $2,034. So actually Ohio wins at most income levels, because of that deduction. But Indiana also has a relatively low standard deduction, so it's not a clean comparison.
The bigger Indiana caveat: county income taxes. Indiana counties levy their own income taxes on top of the 2.95% state rate, ranging from 0.5% to over 3% depending on where you live. Marion County (Indianapolis) adds 2.02%. Hamilton County adds 1.0%. So the headline 2.95% can effectively be 4–5% for urban residents.
Still — the direction of travel is clear. Indiana has cut its rate in four of the past five years. It's on a path toward eventually competing with or even reaching zero.
Mississippi: Heading Toward Zero
Mississippi dropped its flat income tax rate from 4.7% to 4.0% for 2026. And the stated goal of the Mississippi Legislature is to eliminate the income tax entirely — not in some vague theoretical future, but on a legislated schedule.
The phasedown continues:
- 2025: 4.7%
- 2026: 4.0%
- 2027: 3.0%
- 2028+: Full elimination (contingent on revenue benchmarks)
If this holds, Mississippi would join the nine states with no income tax by 2028 or 2029. That would be a significant economic shift for a state that has historically struggled with outmigration.
Right now at 4.0%, Mississippi residents aren't saving huge dollars compared to neighboring states — Alabama tops out at 5%, Arkansas at 3.9%. But the trajectory is the story here. Mississippi is making a bet that eliminating income tax will attract more residents and businesses than the revenue cost. Whether that pays off is a real policy question, but the momentum is real.
Georgia and Oklahoma Also Cut
Georgia: 5.19%
Georgia's flat rate dropped from 5.49% to 5.19% for 2026, continuing its own phasedown toward 4.99% over the next few years. The rate applies to all income above a modest exemption amount. Not a dramatic cut, but Georgia has moved pretty aggressively on tax reform over the past several years — switching from progressive brackets to a flat system and then cutting that flat rate annually.
At $100,000 income, a Georgia resident pays roughly $5,190 in state income tax. Compare that to neighboring Florida (zero) or Tennessee (zero) — there's still a meaningful gap. But Georgia offers something those states can't: Atlanta's job market, Savannah's coast, and Blue Ridge's mountains. Tax is one factor. Lifestyle is another.
Oklahoma: Simplified to Three Brackets
Oklahoma restructured its income tax from six brackets down to three effective January 1, 2026:
| Taxable Income (Single) | Rate |
|---|---|
| $0 – $4,900 | 2.5% |
| $4,900 – $7,200 | 3.5% |
| Over $7,200 | 4.5% |
The top rate dropped from 4.75% to 4.5%. Most Oklahomans hit the 4.5% bracket quickly given the low thresholds, so in practice this is nearly a flat 4.5% system. The simplification is worth noting — fewer brackets means fewer planning complications and easier withholding calculation.
How These Six States Rank Now
After the 2026 changes, here's where each of these states lands on income tax rate compared to the full national picture:
| State | 2026 Rate | System | Approximate National Rank (1 = lowest) |
|---|---|---|---|
| Indiana | 2.95% flat | Flat | ~2nd (after Arizona at 2.5%) |
| Ohio | 2.75% flat + $26,050 deduction | Flat | ~3rd–5th (effective rate varies by income) |
| North Carolina | 3.99% flat | Flat | ~8th–10th |
| Mississippi | 4.0% flat | Flat | ~10th–12th |
| Oklahoma | 4.5% top | 3 brackets | ~15th–18th |
| Georgia | 5.19% flat | Flat | ~25th–28th |
Rankings are approximate and based on top marginal rates. Overall tax burden rankings differ when property tax, sales tax, and cost of living are included.
For context: the nine no-income-tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) still dominate the low end of this ranking. Everything above is among states that do charge income tax.
But here's the thing — Indiana at 2.95% and Ohio at an effective rate close to 2.75% for most earners are genuinely competitive with the low end of that spectrum, especially when you factor in that no-income-tax states often offset the gap with higher property or sales taxes. Wyoming has no income tax but a very low population. Texas has no income tax but property tax averaging 1.68% of assessed value.
What This Means If You're Considering a Move
If you live in one of these six states, your 2026 state income tax bill is smaller. How much smaller depends on your income and which state you're in. Ohio's change is the most dramatic structurally — the move to a flat system with a generous standard deduction is a real shift in how the tax works, not just a small rate trim.
If you're deciding whether to move to one of these states, the calculus is more complex. A few things worth knowing:
Ohio's municipal taxes can eat the savings. Living in Columbus or Cleveland adds 2.5% on top of the 2.75% state flat rate. For some earners that's worse than what they'd pay in a no-local-tax state with a slightly higher flat rate.
North Carolina's trajectory is compelling. If the phasedown holds, 2.49% by 2029 is exceptional for a state with Charlotte and Raleigh-Durham's labor market, Research Triangle jobs, and a mild climate. That's a longer-term play, but worth watching.
Mississippi's elimination timeline is real, not hypothetical. The legislation is passed. The benchmarks are publicly defined. If Mississippi eliminates its income tax by 2028–2029, it becomes a different proposition for relocation. Right now at 4.0% it's still not the most competitive, but it's directionally significant.
And honestly? For most people, the income tax difference between states in this tier — Ohio at 2.75% versus North Carolina at 3.99% versus Mississippi at 4.0% — isn't the deciding factor in a move. At $100,000 income, we're talking about a $2,000 swing in annual tax. That's meaningful, but it's less than a month's rent in most cities these states are competing to attract workers to.
The bigger factors are cost of living, job markets, and property taxes. But if you're already choosing between two similar places, a state that's actively lowering taxes on a defined schedule — especially Ohio or North Carolina — tips the scale a bit.
Want to run the actual numbers for your income? Use the Ohio tax calculator, North Carolina calculator, or the Best Places to Live & Work tool to compare all 50 states side by side at your specific income level. All 2026 rates, verified against official state sources.
Sources: Tax Foundation "2026 State Tax Changes" report (January 2026); Ohio HB 96 (2025); Ohio Dept. of Taxation 2026 withholding tables; North Carolina Department of Revenue 2026 tax rates; Indiana Dept. of Revenue 2026 adjusted gross income tax; Mississippi Dept. of Revenue 2026 guidance; Georgia Dept. of Revenue 2026 tax tables; Oklahoma Tax Commission 2026 withholding tables. This article is for educational purposes and does not constitute tax advice.