A number of states are lowering income taxes this year, putting more money into many Americans’ pockets as they continue to grapple with stubborn inflation.
At least 12 states, a majority led by Republicans, will reduce taxes for residents in some form this year, according to the Tax Foundation, a nonpartisan group that lobbies for lower taxes.
Here is a closer look at where state taxes are being reduced.
NEW IRS TAX BRACKETS TAKE EFFECT IN 2024, MEANING YOUR PAYCHECK COULD BE BIGGER NEXT YEAR
Arkansas
At the start of January, the top individual income tax rate in Arkansas fell to 4.4%, down from 4.9% the previous year.
The change accelerates rate reductions that originally were scheduled to begin in the 2025 tax year.
Connecticut
Connecticut will deliver some relief to taxpayers this year, cutting its 3% individual income tax bracket to 2%, and reducing its 5% bracket to 4.5%. However, the relief does not apply to individuals earning $150,000 or more, or married couples earning $300,000 or more.
All other rates remain unchanged, including the top marginal rate.
Georgia
Georgia will join several states that have either adopted or are considering a flat tax rate. The Peach State will eliminate its six individual income tax rates in favor of a flat tax rate of 5.49% under legislation signed by Republican Gov. Brian Kemp in 2022.
IRS PLANS TO TEST FREE TAX-FILING PILOT PROGRAM IN 13 STATES NEXT YEAR
Indiana
Indiana will accelerate its previously enacted tax rate cuts in 2024, trimming the individual income tax rate from 3.15% to 3.05%.
Iowa
Iowa is slowly moving toward a planned flat tax rate of 3.9%, which it intends to hit in 2026, as part of a $1.9 billion tax cut signed by Republican Gov. Kim Reynolds in 2022.
In 2024, it will reduce the top marginal tax rate to 5.7%.
Mississippi
Mississippi residents with income exceeding $10,000 will pay a single tax rate of 4.7% this year, down from the initial rate of 5% that was established in 2023, according to the Tax Foundation.
The tax rate will eventually drop to 4.4% in 2025 and 4% in 2026.
YELLEN SAYS REPUBLICAN CUTS TO IRS FUNDING WOULD BE ‘DAMAGING AND IRRESPONSIBLE’
Montana
Montana approved a major tax overhaul in 2021, combining its seven tax brackets into two. Beginning in 2024, the top marginal rate for Montana residents will fall to 5.9% in 2024, down from 6.75% the previous year. The lower rate will drop to 4.7% for the 2024 filing year.
The higher rate will apply to income above $20,500 for single taxpayers and $41,000 for married couples filing jointly.
Nebraska
Nebraska will reduce its top marginal tax rate from 7.25% to 5.84% in 2024 for all income above $100,000.
The state is working to reduce the top rate to 3.99% by 2027.
New Hampshire
Unlike the other states which are reducing income taxes, New Hampshire is phasing out a tax on interest and dividends income.
The tax rate – which will be lowered to 3% in 2024, down from 4% the previous year – is set to be eliminated in 2025.
North Carolina
The flat income tax rate in North Carolina will fall to 4.5% in 2024, down from 4.75% the previous year.
Ohio
In legislation passed last year, Ohio consolidated the top two marginal tax rates for individual income into one and set the rate at 3.5% in 2024.
South Carolina
South Carolina will reduce its top individual income tax rate from 6.5% to 6.4% in 2024. The Palmetto State aims to reduce the rate further to 6%.
Read the full article here
