The first half of 2023 has seen income tax cuts go into effect for individuals and corporations, and many states are contemplating doing away with a state income tax altogether.
Residents in 11 states — more than 20% of the nation — will pay less of their income to their state governments soon.
Here are the 11 states where you’ll pay the government this year — and where you should focus on moving if you want to enjoy reduced tax rates in the future.
In Arkansas, income tax cuts included cutting the top individual income tax rate to 4.7% from 4.9% for residents making more than $24,3000.
That cut on lower-income Arkansans could impact over 1.1 million taxpayers and is projected to cost the state $186 million.
Connecticut’s income tax cuts impact both middle-class and lower-income residents in the state, beginning in 2024.
For individuals earning under $150,000 and couples earning under $300,000, income tax rates will decrease to 2% from 3% on the first $10,000 (individual) and $20,000 (couple) and 4.5% from 5% on the next $40,000 (individual) and $80,000 (couple).
Connecticut’s Earned Income Tax Credit for low-income workers will increase to 40% from 30.5%.
Hoosiers are seeing their income tax rate drop to 3.15% in 2023, from an already decreased rate of 3.23% in 2022. The tax cut plan puts into place a gradually decreasing income tax rate for the next four years before reaching 2.9% in 2027.
The state estimates that the tax cuts will save a taxpayer with a $50,000 income $165 a year.
Kentucky had revenue goals that had to be met before their residents could enjoy an income tax cut.
But those were reached in September 2022, and now the personal income rate has been reduced by 0.5% to 4.5%, giving those in the Bluegrass State more green in their pocket.
If revenue benchmarks continue to be met, the income tax rate may further decline to 4.0% in 2024.
Michigan has a law that automatically reduces income tax rates when a state revenue threshold is met. Thanks to high revenue in 2022, Michigan made a temporary income tax rate cut in 2023.
Those in the Great Lakes State will have more money for their Great Lakes vacation with their income tax cut to 4.05% from 4.25%. But it’s only valid for this tax year and will be reevaluated going forward.
In what Montana governor Greg Gianforte has called the “largest tax cut in Montana history,” their top income tax rate is set to drop to 5.9% in 2023, a significant cut from its current 6.75% rate.
The legislation also provides primary-residence property tax relief for homeowners. Montana has no sales tax.
Nebraska also implemented tax cuts to lower the income tax burden on its citizens. There is a plan to reduce the top income tax rate on individuals and businesses to 3.99% in a graduated decrease by 2027.
There are also new tax credits for child care for families and providers.
An act passed in late 2021 finally went into effect in 2023 in North Carolina, and the state’s flat income tax rate was reduced to 4.75% from 4.99%.
The rate will continue to decrease until it reaches 3.99% in 2027. Meanwhile, the corporate income tax, which is currently 2.5%, could be completely phased out at that point.
The top income tax rate for residents of North Dakota is already 2.9%, but rates for all incomes are about to get even lower.
Individual filers making less than $44,725 and couples making less than $74,750 will no longer pay income tax.
On an annual income of up to $225,975 for individuals and $275,100 for couples, an income tax rate of 1.95% will be applied. On incomes above that amount, the rate is a flat 2.5%.
Utah's state income tax rate has been reduced to 4.65% from 4.85%. Legislators project that a family of four making $80,000 a year would get $208 back in their wallet.
Coupled with a possible constitutional amendment removing the state sales tax on food, Utah residents could enjoy a little extra cushion in the coming years.
The most significant tax cut in West Virginia history went into effect on January 1, 2023. The five brackets are:
- 2.36% under $10,000
- $236 plus 3.15% of the excess over $10,000 but under $25,000
- $708.50 plus 3.54% of the excess over $25,000 but under $40,000
- $1,239.50 plus 4.72% of the excess over $40,000 but under $60,000
- $2,183.50 plus 5.12% of the excess over $60,000
Many of these tax cuts have been voted for with bipartisan support in the hopes that they’ll keep the economy growing, even with fears around inflation and a possible recession.
And, if these cuts work and spending continues to grow in 2023, more income tax cuts could be on the horizon across the country to help you boost your bank account.