2026 State Tax Shake-Up: See How Your Income, Property, and Sales Taxes Will Change
As the calendar flips to 2026, taxpayers across the country will feel the impact of sweeping state tax changes. From income tax cuts and flat-tax expansions to corporate reforms, sales tax overhauls, and property tax relief, 43 states are implementing notable tax changes, most taking effect January 1, 2026. Together, they reveal a clear trend: states are competing harder than ever to attract workers, families, retirees, and businesses.
Below are some of the significant changes.
A Nationwide Shift Toward Tax Competition in 2026
The new year brings another wave of pro-growth tax reforms, reinforcing a long-running trend of states lowering tax burdens to stay economically competitive. Most major rate changes take effect January 1, aligning with calendar-year tax filing and withholding schedules.
Eight States Cut Individual Income Tax Rates
Eight states will reduce individual income tax rates starting January 1, 2026, delivering immediate relief to millions of taxpayers:
Indiana
Kentucky
Mississippi
Montana
Nebraska
North Carolina
Ohio
Oklahoma
Ohio Joins the Flat-Tax Club
Ohio will transition to a flat 2.75% income tax rate, replacing its prior graduated structure. Income below $26,050 remains untaxed, and Ohio becomes the 15th state with a flat individual income tax.
Indiana’s Long-Term Plan to Reach 2.55%
Indiana’s flat tax drops to 2.95% in 2026, with another cut scheduled for 2027. If revenue targets are met, the state could gradually lower the rate to 2.55% beginning in 2030, signaling a long-term commitment to income tax reduction.
Kentucky and Mississippi Continue Aggressive Phase-Downs
Kentucky’s flat rate falls sharply to 3.5% from 4%, while Mississippi lowers its rate to 4%, marking the final step in a multi-year phase-down of its individual income tax.
Montana and Nebraska Reshape Their Tax Brackets
Montana trims its top marginal rate to 5.65% and expands the lower-rate bracket, while Nebraska cuts its top rate to 4.55%, part of a plan to reach 3.99% by 2027.
North Carolina Completes Its Multi-Year Income Tax Cut
North Carolina’s flat income tax falls to 3.99%, completing a multi-year reform that significantly lowered rates and strengthened the state’s competitive position in the Southeast.
Oklahoma Consolidates Six Brackets Into Three
Oklahoma reduces its top rate to 4.5% and simplifies its tax code by consolidating six income tax brackets into three, easing compliance for filers.
Corporate Income Tax Cuts Expand in 2026
Three states will reduce corporate income tax rates effective January 1:
Nebraska
North Carolina
Pennsylvania
These changes are aimed at improving business investment and job creation.
Arkansas and Delaware Modernize Business Tax Rules
Arkansas continues phasing out its throwback rule, adopts market-based sourcing, and implements economic nexus thresholds. Delaware, meanwhile, decouples S corporations and partnerships from federal bonus depreciation rules for equipment and structures.
Capital Stock Taxes Continue to Disappear
Louisiana officially begins phasing out its capital stock (franchise) tax in 2026, while Mississippi continues its own planned phase-down; part of a broader trend away from taxes on business net worth.
Sales Tax Relief Targets Groceries and Broadband
Several states are reshaping sales tax bases:
Arkansas repeals its state sales tax on groceries (local taxes remain).
Illinois eliminates its state grocery tax but allows local governments to replace it.
Missouri exempts broadband machinery and equipment from sales and use taxes.
Ohio Repeals Multiple Sales Tax Exemptions
Ohio removes several sales and use tax exemptions, including those for loaner cars, certain vending machine foods, advertising materials, and call center telecommunications services.
Property Tax Relief Expands for Veterans and Seniors
Multiple states enact new or expanded property tax relief:
Arizona fully exempts certain veterans from property taxes.
Arkansas expands homestead eligibility for disabled veterans.
Missouri broadens property tax credits for seniors.
Indiana Overhauls Its Homestead Exemption
Indiana introduces a new homestead credit, adds targeted relief for seniors, disabled homeowners, and veterans, and creates new deductions for agricultural land and non-homestead property.
Montana Separates Taxes on Homes and Rentals
Montana implements a tiered property tax system, lowering rates for owner-occupied homes while imposing higher rates on second homes and rental properties; a major structural shift.
Business Property Tax Exemptions Increase
Arizona, Indiana, and Wyoming raise their de minimis exemptions for business personal property, while Texas voters approved a new exemption, reducing compliance burdens for small businesses.
What It All Means for Taxpayers in 2026
Taken together, the January 1, 2026 tax changes underscore a clear message: states are using tax policy as a competitive weapon according to the latest data from Tax Foundation.
Whether you’re a worker, retiree, homeowner, or business owner, where you live; and where you choose to invest; could matter more than ever in the year ahead. Experts recommend validating the tax changes with a tax planner to determine your optimal tax strategies.
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The 30% Rule is Dead: New Data Shows Buying a Home is ‘Mathematically Impossible’ in 47 Major Cities
The American Dream has hit a mathematical wall. For decades, the “30% rule” has been the standard of personal finance: never spend more than 30% of your gross income on housing. But a startling new report released proves that this advice is now obsolete for the vast majority of Americans. According to the latest data, 47 of the 50 largest U.S. metropolitan areas now require residents to spend significantly more than 30% of their income to afford a median-priced home. With mortgage rates hovering around 6.82% and home prices remaining stubborn, the gap between wages and real estate values has widened into a canyon. Here is a deep dive into the numbers, revealing the few remaining affordable havens and the coastal giants where homeownership has become a statistical impossibility.
The 30% Rule is Dead: New Data Shows Buying a Home is ‘Mathematically Impossible’ in 47 Major Cities
Think $32,000 Is Poverty? New Analysis Says Families Need $140,000 Just to Stay Afloat
Michael Green, portfolio manager and chief strategist at Simplify Asset Management, generated some controversy this week with his analysis trying to explain why the middle class is being squeezed. He warned that a long-ignored flaw at the heart of U.S. economic measurement has quietly broken the country.
Think $32,000 Is Poverty? New Analysis Says Families Need $140,000 Just to Stay Afloat
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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