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10 States Making Big Changes to Income Tax Rates in 2025
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As of January 1, 2025, 10 states have changed their income tax codes. Nine of the states lowered their tax rates and one no longer taxed the income. Find out what this means to you.
Main points
- Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina and West Virginia will reduce tax rates starting January 1, 2025.
- Nine states, including New Hampshire, now do not tax the income at all.
- Fourteen states have a flat, flat tax rate on all income, and 29 states have a marginal income tax, meaning the more you make, the more you pay.
What’s new in 2025?
In 29 states and Washington, D.C., residents must pay marginal income tax rate. This means that in these states, the more money you make, the greater percentage of your top wage you pay. This is in contrast to a flat tax, which is a single tax rate that applies to everyone and all of your dollars, no matter how much money you make.
Kansas has twice tried to switch to a flat rate, but the governor vetoed the proposal twice, in 2023 and 2024. The state will still have marginal tax rates in 2025. Georgia and Pennsylvania converted to flat tax rate Early 2024. In November 2024, Louisiana did the same thing. New Hampshire’s previous tax on dividend and interest income is no longer in effect starting in 2025, meaning the state joins the ranks of states that do not tax the income. Iowa will move to a flat rate starting in 2025.
Effective January 1, 2025, nine states have reduced tax rates. Some states have a flat tax rate, while others have a marginal tax rate:
- Indiana
- Iowa
- Louisiana
- mississippi
- missouri
- nebraska
- New Mexico
- North Carolina
- west virginia
Wyoming is the best state to live in when it comes to taxes, while New York is the worst, according to the Tax Foundation’s 2025 State Tax Competitiveness Index.
Maximum state income tax rate
What fees will you pay in your state? These are the top tax rates by state as of the 2025 tax year.
| Top state income tax rates for 2025 | ||
|---|---|---|
| alabama | 5.00% | |
| Alaska | 0.00% | |
| Arizona | 2.50% | |
| Arkansas | 4.90% | |
| california | 13.30% | |
| colorado | 4.40% | |
| connecticut | 6.99% | |
| delaware | 6.60% | |
| District of Columbia | 10.75% | |
| Florida | 0.00% | |
| Georgia | 5.75% | |
| hawaii | 11.00% | |
| idaho | 5.80% | |
| illinois | 4.95% | |
| Indiana | 3.00% | Effective January 1, 2025 |
| Iowa | 3.80% | Effective January 1, 2025 |
| kansas | 5.70% | |
| kentucky | 4.50% | |
| Louisiana | 3.00% | Effective January 1, 2025 |
| maine | 7.15% | |
| Maryland | 5.75% | |
| Massachusetts | 9.00% | |
| michigan | 4.25% | |
| minnesota | 9.85% | |
| mississippi | 4.40% | Effective January 1, 2025 |
| missouri | 4.70% | Effective January 1, 2025 |
| Montana | 6.75% | |
| nebraska | 5.20% | Effective January 1, 2025 |
| nevada | 0.00% | |
| New Hampshire | 0.00% | Effective January 1, 2025 |
| new jersey | 10.75% | |
| New Mexico | 5.90% | Effective January 1, 2025 |
| New York | 10.90% | |
| North Carolina | 4.50% | Effective January 1, 2025 |
| north dakota | 2.64% | |
| Ohio | 3.99% | |
| Oklahoma | 4.75% | |
| oregon | 9.90% | |
| pennsylvania | 3.07% | |
| rhode island | 5.99% | |
| south carolina | 6.50% | |
| south dakota | 0.00% | |
| tennessee | 0.00% | |
| Texas | 0.00% | |
| Utah | 4.85% | |
| Vermont | 8.75% | |
| virginia | 5.75% | |
| washington | 7.00% | |
| west virginia | 4.82% | Effective January 1, 2025 |
| Wisconsin | 7.65% | |
| Wyoming | 0.00% | |
Source: Tax Foundation and Tax-Rates.org
States with a flat tax rate
Fourteen states fall into the flat tax category:
- Arizona
- colorado
- Georgia
- idaho
- illinois
- Indiana
- Iowa
- kentucky
- Louisiana
- Massachusetts
- michigan
- North Carolina
- pennsylvania
- Utah
Mississippi didn’t make the list, but it falls into a gray area. Technically, the state has two income tax rates, but one is 0%. It applies to incomes below $10,000. As of 2025, all income over $10,000 is taxed at a rate of 4.4%.
states with no income tax
Some people are lucky enough to live in one of nine states with no income tax. As of 2025, the nine tax-free states are:
- Alaska
- Florida
- nevada
- New Hampshire
- south dakota
- tennessee
- Texas
- washington
- Wyoming
Wyoming makes the list because the state does not tax earned income, only income. capital gains.
bottom line
The scope of your state tax bill depends on where you live. Some states have a single, uniform tax rate. As you earn more, others will tax your top income at a higher rate. Some people have no income tax at all.
state tax Liability can be further complicated as states change their tax laws every year. Before preparing your 2024 state tax return, be sure to do your research and homework so you can effectively plan for 2025.
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