2025 State PIT Tax Rate Reductions

Some taxpayers can look forward to lower state income taxes this year. Nine states reduced their individual income tax rates beginning in 2025.  

Resident and nonresident taxpayers who file income tax returns in these states should consider the impact of the lower rates in their tax projections and planning.  

States with Personal Income Tax Reductions for 2025 

Indiana 

Indiana’s 2025 income tax rate is 3%, down from 3.05% in 2024. Further rate reductions are scheduled for 2026 and 2027, but only if state revenue collections exceed a specified amount.  

Iowa 

Iowa adopted a 3.8% flat tax beginning in 2025. The flat tax replaces a graduated income tax scheme that maxed out at 6% in 2024.  

Louisiana 

Louisiana adopted a 3% flat tax beginning in 2025, down from a graduated tax with a top rate of 4.25% in 2024. Further rate reductions are possible each January 1st through 2034 in future years if income tax collections exceed certain targets.  

Mississippi 

Mississippi’s flat tax on taxable income greater than $10,000 drops to 4.4% in 2025 from 4.7% in 2024. The rate will remain at 4% for the calendar year 2026 and thereafter.  

Missouri 

Missouri’s maximum graduated income tax rate for 2025 is 4.7%, down from 4.8% in 2024. 

Nebraska 

Nebraska’s maximum income tax bracket for 2025 is 5.2%, down from 5.84% in 2024. Further reductions in the State’s highest and second-highest brackets apply beginning in 2026 and 2027.  

New Mexico 

New Mexico’s maximum income tax rate remains at 5.9%. However, beginning in 2025, all filing statuses (single, head of household, married filing separately) will have six brackets instead of the prior five brackets. The result is that low- and middle-income taxpayers will be subject to lower graduated rates until the maximum rate applies. For example, in 2024, a 1.7% rate was applied to married filing joint taxpayers' incomes of up to $8,000. In 2025, a 1.5% rate applies to that income.  

North Carolina 

North Carolina’s flat income tax rate is reduced to 4.25% in 2025 from 4.50% in 2024. The rate will drop to 3.99% in 2026.  

West Virginia 

West Virginia taxpayers' top income tax rate will be reduced to 4.82% in 2025, down from 5.12% in 2024.   

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