State Income Tax Changes Effective January 1, 2027
Enacted statutory steps, with the law behind each one.
Which states change income tax rates on January 1, 2027?
Five enacted changes take effect January 1, 2027. Indiana's flat individual income tax rate falls from 2.95% to 2.90%, the final scheduled step of HB 1001 (2023). Mississippi's flat rate on taxable income over $10,000 falls from 4.00% to 3.75% under HB 1 (2025). Montana's top marginal rate falls from 5.65% to 5.40% under HB 337 (2025), which also widened the band taxed at the lower 4.7% rate. Nebraska's top marginal rate falls from 4.55% to 3.99%, completing the LB 754 phase-down. North Carolina's flat rate falls from 3.99% to 3.49% under S.L. 2026-41, the 2026 budget, which replaced the old revenue triggers with a fixed schedule (3.49% through 2029, 3.24% for 2030–2032, 2.99% after 2032).
- Indiana: 2.95% → 2.90% flat (HB 1001, 2023).
- Mississippi: 4.00% → 3.75% on taxable income over $10,000 (HB 1, 2025).
- Montana: top rate 5.65% → 5.40% (HB 337, 2025).
- Nebraska: top rate 4.55% → 3.99% (LB 754 phase-down).
- North Carolina: 3.99% → 3.49% flat (S.L. 2026-41; fixed for 2027–2029).
- Update trigger: January rate publications and state withholding tables.
Source:Tax Foundation — state individual income tax rates and brackets
The 2027 tracker
| State | 2026 | 2027 | Authority & notes |
|---|---|---|---|
| IndianaFlat tax | 2.95% | 2.90% | HB 1001 (2023)Final scheduled step of the 2023 phase-down. SB 451 (2025) can take the rate as low as 2.55% in 0.05-point steps in even-numbered years starting 2030 if revenue triggers are met. |
| MississippiFlat tax | 4.00% over $10,000 | 3.75% over $10,000 | HB 1 (2025)The first $10,000 of taxable income is not taxed; the flat rate applies above it. Continues a multiyear schedule: 3.5% in 2028, 3.25% in 2029, 3% in 2030. Cuts below 3% can start in 2031 if revenue triggers are met, with a full phase-out possible. |
| MontanaGraduated | 5.65% top rate | 5.40% top rate | HB 337 (2025)Lower 4.7% bracket rate is unchanged, but the bill significantly widened the income band it applies to. |
| NebraskaGraduated | 4.55% top rate | 3.99% top rate | LB 754 (2023) phase-downFinal step of the phase-down that began in 2023. |
| North CarolinaFlat tax | 3.99% | 3.49% | S.L. 2026-41 §44.1 (S.B. 257), signed July 7, 2026The 2026 budget replaced the 2023 revenue triggers with a fixed schedule in G.S. 105-153.7(a): 3.49% for 2027–2029, 3.24% for 2030–2032 and 2.99% after 2032. Revenue triggers now start with taxable year 2035 (FY 2033-34 General Fund revenue above $40.258 billion), each cutting 0.25 point, down to a 2.49% floor. |
Rates shown are statutory individual income tax rates. Local income taxes, such as Indiana county rates, apply on top and are set separately.
Enacted steps versus later revenue triggers
An enacted step is already law with a fixed effective date; you can plan withholding and estimated payments around it today. Every 2027 row in the table above is enacted law, and none of them depends on a revenue trigger.
A revenue-trigger cut only happens if the state certifies that revenue cleared a statutory threshold; until then the current rate is the planning rate. In these states such triggers reach later years only. North Carolina's start with taxable year 2035, after S.L. 2026-41 replaced the 2027–2034 triggers with a fixed schedule. Mississippi's cuts below 3% can start in 2031 under HB 1 (2025).
Update trigger for this page: the annual state rate publications and withholding tables each January.
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OpenFrequently asked questions
- Which states are cutting income taxes on January 1, 2027?
- Five enacted changes take effect: Indiana's flat rate drops to 2.9%, Mississippi's rate on taxable income over $10,000 drops to 3.75%, Montana's top rate drops to 5.4%, Nebraska's top rate drops to 3.99%, and North Carolina's flat rate drops to 3.49% (S.L. 2026-41). None of the five depends on a revenue trigger.
- What is a trigger-based tax cut?
- A statute that schedules a rate reduction only if state revenue exceeds a defined threshold. The reduction is not guaranteed — the state certifies the revenue figures after the fiscal year closes, and the rate change only takes effect if the test is met. None of the 2027 changes on this page depends on one; any revenue triggers in these states affect later years only.
- Does a lower rate mean a lower bill?
- Not always. Bracket widths, standard deductions, personal exemptions and credits move too. Montana's 2027 change, for example, pairs the top-rate cut with a much wider band for the lower 4.7% rate, which matters more than the headline for many filers.
- When do withholding tables change?
- Most states publish revised withholding tables in December for a January 1 effective date. If your employer is slow to load them you may be over-withheld for a few pay periods; it comes back on the state return.
Sources & References
Primary references used for this content
State individual income tax rates and brackets
Per-state notes on the Indiana, Mississippi, Montana, Nebraska and North Carolina schedules. Its North Carolina note predates S.L. 2026-41.
View on taxfoundation.org
Current Operations Appropriations Act of 2026, signed July 7, 2026
Rewrites G.S. 105-153.7: 3.49% for 2027–2029
View on ncleg.gov
Mississippi individual income tax rate schedule (Miss. Code §27-7-5)
3.75% for 2027 on taxable income over $10,000
View on billstatus.ls.state.ms.us
Indiana individual income tax rate phase-down
Statutory schedule taking the flat rate to 2.9% in 2027
View on iga.in.gov
Montana individual income tax revisions
Top-rate reduction to 5.4% and the widened lower bracket
View on bills.legmt.gov
✓5 primary sources; links re-checked on a weekly rotation by the source watcher
Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.