State Income Tax Changes

Nine states have individual income tax rate reductions taking effect: 

• Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Oklahoma, and Ohio are all scheduled to see individual income tax rate reductions.
• Ohio will transition to a flat-rate income tax system.
• Oklahoma’s existing six tax brackets will be consolidated into three.
• New York is expanding its child tax credit.
• Montana will expand its earned income tax credit (EITC). 

For corporate income taxes, four states have reductions: Georgia, Nebraska, North Carolina, and Pennsylvania. No states increased their corporate income tax rates in 2026. 

Texas-Specific Changes

For residents of Texas, which does not have a state income tax, new laws effective January 1, 2026, focus on property and franchise taxes: 

• Property Tax Calculation Reforms: Counties and other taxing units are required to use electronic, hyperlinked forms when determining tax rates, aimed at improving transparency and reducing errors.
• Intangible Personal Property Tax Exemption: Intangible personal property (e.g., business goodwill) is removed from taxation in Texas.
• Stock-Exchange Activity Franchise Tax Exemption: Certain stock-exchange activities are exempt from the Texas franchise tax. 

Federal Tax Context

These state changes interact with significant, permanent federal changes under the “One Big Beautiful Bill” Act (OBBBA), many of which effectively extended the 2017 Tax Cuts and Jobs Act provisions and took effect for the 2025 tax year, with full implementation and inflation adjustments continuing into 2026. Key federal changes relevant to state filing include: 

• Increased Standard Deduction: The higher standard deduction amounts are made permanent and adjusted for inflation, expected to be around $16,100 for single filers and $32,200 for married couples filing jointly in 2026.
• Higher SALT Cap: The state and local tax (SALT) deduction cap increases from $10,000 to $40,000 (with phaseouts for high earners), which may affect state itemization decisions.
• New Deductions: New federal deductions for specific tip income and overtime pay are available through 2028.