Find Out How Much You’ll Owe in State Taxes in 2025 – Can You Afford It?

Are You Aware? States’ Income Tax Changes in 2025

The landscape of income tax rates in the United States is shifting, with several states making significant changes to their individual income tax systems in 2025. From rate reductions to bracket revisions, the adjustments made are poised to impact taxpayers across the nation. Let’s delve into the notable shifts happening this year:

1. Arkansas:

• The top individual income tax rate was slashed from 4.7 percent to 3.9 percent, effective January 1, 2024.
• A further reduction to 4.4 percent followed in June 2024.

1. Colorado:

• Temporary rate reduction to 4.25 percent for 2024.
• Reverted to the statutory rate of 4.4 percent in January 2025 due to a surplus under the Taxpayer’s Bill of Rights law.

1. Georgia:

• The flat individual income tax rate dropped from 5.49 percent to 5.39 percent in 2024.
• Future reductions planned, but not met for 2025, keeping the rate at 5.39 percent.

1. Hawaii:

• Revised tax brackets with widened ranges.
• Increased standard deduction and bracket adjustments, with further phase-ins planned.

1. Idaho:

• Retroactively reduced individual and corporate income tax rates to 5.695 percent in March 2024.

1. Indiana:

• Accelerated rate reductions to 3.00 percent in 2025 with further cuts to 2.9 percent in subsequent years.

1. Iowa:

• Consolidation of tax brackets into a single bracket at 3.8 percent from January 1, 2025.

1. Kansas:

• Consolidation of brackets, reduced top marginal rate, increased exemptions, and deductions.
• Various exemptions and standard deductions adjusted for single filers and married couples.

1. Louisiana:

• Comprehensive tax reform law effective January 1, 2025, with a single rate of 3 percent.
• Combined standard deduction and personal exemption replaced with new thresholds.

1. Mississippi:

• Continuing rate reductions with a decrease from 4.7 percent to 4.4 percent.
• Applied on taxable income exceeding $10,000, effective January 1, 2025.

1. Missouri:

• Reduction of top individual income tax rate from 4.8 percent to 4.7 percent.
• Implemented in January 2025 based on revenue triggers met in the previous fiscal year.

1. Nebraska:

• Reduction of top individual income tax rate from 5.84 percent to 5.20 percent in 2025.
• Planned gradual reduction to 3.99 percent by 2027.

1. New Hampshire:

• Repeal of interest and dividends tax, aligning with states without individual income tax, effective January 1, 2025.

1. New Mexico:

• Introduction of a new 4.3 percent bracket for low and middle-income households.
• Increased income thresholds for existing brackets.

1. North Carolina:

• Acceleration of rate reduction from 4.5 percent to 4.25 percent in 2025.
• Further drop to 3.99 percent scheduled by 2026.

1. South Carolina:

• Temporary reduction from 6.4 to 6.2 percent for 2024 with future triggers for further cuts.
• Withholding tables adjusted based on potential rate reductions.

1. Utah:

• Reduction of individual and corporate income tax rates from 4.65 to 4.55 percent in March 2024.

The tide of individual income tax changes in 2025 showcases a paradigm shift in state tax policies to benefit taxpayers. Stay informed and aware of these notable shifts in your state and beyond.