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Income Tax Rates Are on The Decline, If You Live in One of These States

You can expect a slight break in your state income taxes this year if you're living in the right place.

Headshot of Thomas Kika
Headshot of Thomas Kika
Thomas Kika Former Writer
Thomas is a native of upstate New York and a graduate of the University at Albany. As a former member of CNET's How To team, he wrote about the intersection of policy, information and technology, and how you can best be served in that area. Outside of work, he can most often be found watching too many movies, reading too much, drinking too much coffee, or spending time with his cats.
Thomas Kika
3 min read
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Some state income tax rates were cut at the start of 2025.

 James Martin/CNET

Ready to be done thinking about taxes this year? With two weeks to go till April 15, you'd be forgiven for being sick of it all by now, but depending on where you live, you've got a little bit of a break this year: lowered state income taxes.

Tax rates vary from state to state -- as opposed to federal tax rates -- but they always involve collecting a portion of your income from each paycheck. The percentage collected can vary significantly depending on where you live and how much you make. The highest rate in the US is the 13.3% collected in California from those making over $1 million a year, while states including Alaska, Florida and Nevada collect no income tax at all.

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If you live in one of nine specific states, however, you're likely to see your take-home pay increase a bit, after lawmakers in those states cut their income tax rates as of Jan. 1. Some of these cuts are minimal, while others are a bit more substantial. 

Read on for all the details about which states have lowered their income tax rates and by how much. For more on tax season, find out if you're eligible to claim a child tax credit and see what the future might hold for the credit and its value.

Which states have lowered their income tax rates?

As of Jan. 1, income tax rate cuts went into effect in the following nine states:

  • Indiana
  • Iowa
  • Louisiana
  • Mississippi
  • Missouri
  • Nebraska
  • New Mexico
  • North Carolina
  • West Virginia 

How much have income tax rates decreased in these states?

Indiana has seen one of the more minimal cuts, with its income tax rate decreasing from 3.05% to 3% in 2025.

Iowa is dropping to a flat income tax rate of 3.8% in 2025, down from a top rate of 5.7% last year.

Louisiana is also moving to a flat rate from a graduated income tax system, with a flat rate of 3% this year, down from a top rate of 4.25% in 2024. Those in the state's largest income bracket, $30,000-$40,000, will pay only $338 a year in income taxes.

Mississippi's tax rate saw a minimal cut for 2025, down to 4.4% from 4.7% last year. Officials there have also put forward a goal of eventually eliminating income taxes in the state altogether. 

Missouri is another state with a smaller cut this year, down to 4.7% from 4.8%.

Nebraska's income tax rate was cut to 5.2%, down from 5.84% last year.

New Mexico will retain its graduated income tax rate, with two of its six income brackets seeing a decrease in 2025. Those making less than $5,500 a year have seen their rate cut to 1.5% from 1.7%, while those making between $16,500 and $33,500 have seen theirs cut to 4.3% from 4.7%.

North Carolina's rate dropped to 4.5%, down from 4.75% last year. The state also plans to cut the rate to 3.99% in 2026.

In West Virginia, residents can expect to pay 4% less in overall income taxes in 2025, though specific rates have not been reported. The state is another where lawmakers have also put forward the goal of eventually doing away with income taxes altogether.

For more, find out if you're eligible for the saver's credit.

About the Author

Headshot of Thomas Kika
Former Writer
Former Writer

Thomas is a native of upstate New York and a graduate of the University at Albany. As a former member of CNET's How To team, he wrote about the intersection of policy, information and technology, and how you can best be served in that area. Outside of work, he can most often be found watching too many movies, reading too much, drinking too much coffee, or spending time with his cats.