In this article, we will look at 16 states with income tax cuts in 2024. If you want to skip our detailed analysis, head straight to 5 States with Income Tax Cuts in 2024.
2024 Tax Brackets
The US has experienced a series of significant tax reforms over the past several years, with tax cuts being a prominent development. Most of the states understand the significance of maintaining a stable, pro-growth, and competitive tax code, especially after the COVID-19 pandemic. There are some states with no sales tax or income tax and with more states reducing their income tax in 2024, US residents should be pleased. According to the Tax Foundation, thirty-four states are going through notable tax changes in 2024. The tax changes took effect on January 1, 2024. Generally, state tax changes take effect either at the start of the calendar year or the fiscal year, which begins on July 1. However, the rate changes for major taxes are usually implemented effective January 1.
The Internal Revenue Service (IRS) has made changes to more than 60 tax provisions for tax year 2024. The tax year 2024 changes will apply to income tax returns filed in 2025. The top tax remains unchanged at 37% from 2023 for individual single taxpayers with incomes greater than $609,350 and $731,200 for married couples filing jointly. The other rates are 35%, 32%, 24%, 22%, and 12% for individual single taxpayers with incomes over $243,725, $191,950, $100,525, $47,150, and $11,600, respectively. The minimum income tax rate for a single person is 10% with an income bracket of $11,600 or less. The IRS has increased the standard deduction for married couples filing jointly to $29,200 for 2024, up by $1,500 from tax year 2023. For individual taxpayers and married individuals filing separately, the IRS has increased the standard deduction to $14,600 for 2024, a rise of $750 from 2023. While, the standard deduction will be $21,900 for heads of households during the tax year 2024, increasing by $1,100 from the amount charged in tax year 2023. One of the main things that remains unchanged for the tax year 2024 is personal exemption, which remains at zero.
The main source of revenue for the US government is individual income taxes followed by corporate income taxes. As of November 30, 2023, the US government had gathered a revenue of almost $678 billion for the fiscal year 2024, as per the US Treasury. Out of the total government revenue, 51% came from individual income taxes, while Social Security and Medicare taxes accounted for another 35% of the revenue. The combined contribution of individual and corporate income taxes is $403 billion, accounting for 59% of total revenue. Since 2015, the US revenue-to-GDP has declined from 18% to 16% in 2023. In fiscal year 2023, the federal government collected a total revenue of $4.44 trillion compared to the government’s spending of $6.13 trillion.
Michigan and California have increased personal income tax rates, rising from 4.05% and 13.30% in 2023 to 4.25% and 14.40% in 2024, respectively. Washington, Alaska, Wyoming, Florida, and Nevada are some of the best tax-friendly states for high income in the US.
Leading US Tax Services Providers
American tax services providers have a vast market to address from individual taxpayers to corporations. The leading US tax service providers offer various services from accounting and payroll services to tax preparation and business consultation. H&R Block, Inc. (NYSE:HRB), CBIZ, Inc. (NYSE:CBZ), and Intuit Inc. (NASDAQ:INTU) are three of the leading US tax service providers.
H&R Block, Inc. (NYSE:HRB) is a top American tax service preparation company. On October 18, 2023, H&R Block, Inc. (NYSE:HRB) announced the appointment of Teri Daley as its Vice President of Corporate Communications. Daley brings extensive communications experience as she has served in various communications programs for Fortune 100 companies. At H&R Block, Inc. (NYSE:HRB), Daley will lead internal, external, and reputation communications under the Chief Marketing and Experience Officer Jill Cress. On November 14, 2023, the company announced the launch of its new generative AI tool for the tax preparation process, H&R Block AI Tax Assist. The AI tax tool will assist individuals, the self-employed, and small business owners with tax preparation services.
CBIZ, Inc. (NYSE:CBZ) is another leading tax, accounting, and advisory services provider. On November 8, 2023, CBIZ, Inc. (NYSE:CBZ) announced that it had appointed Jaileah Huddleston as its new Chief Legal Officer and Corporate Secretary. On December 11, Huddleston succeeded CBIZ, Inc.’s (NYSE:CBZ) long-time General Counsel and Secretary Mike Gleespen. On November 30, 2023, CBIZ, Inc. (NYSE:CBZ) announced that it became a member of the International Benefits Network (IBN), an independent employee benefits and wellbeing consulting firm with a network in over 80 countries. CBIZ, Inc. (NYSE:CBZ) has also become part of the IBN Global Council which designs the overall strategy and leadership of the member network.
Intuit Inc. (NASDAQ:INTU) owns various accounting and tax management software including Credit Karma, TurboTax, and Quickbooks, among others. On January 8, Intuit Inc. (NASDAQ:INTU) announced that Credit Karma members and QuickBooks Online customers can now prepare and file their 2023 taxes through TurboTax. The customers can avail the service within the Credit Karma and QuickBooks Online product experiences. Intuit Inc. (NASDAQ:INTU) is utilizing its AI platform capabilities and tax knowledge engine to integrate tax services within the company’s platforms.
These were a few top tax service providers in the US. Now, let’s take a look at the states with income tax cuts in 2024.
16 States with Income Tax Cuts in 2024
Our Methodology
We have gathered data for the states with income tax cuts in 2024 from the Tax Foundation. We have ranked states with both personal and corporate income tax reductions taking effect in 2024. Ten states have individual income tax rate reductions, three states have corporate income tax rate reductions, and three states have both individual and corporate income tax rate reductions. We have ranked states in the following manner from top to bottom: first, we ranked the states with both personal income tax rate and corporate income tax rate cuts, then we ranked the states with only personal income tax rate cuts, and finally, we ranked the states with only corporate income tax rate cuts. All the states are ranked in ascending order of their personal and corporate income tax rates in 2024.
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16 States with Income Tax Cuts in 2024
16. New Jersey
Corporate Income Tax in 2024: 9%
Corporate Income Tax in 2023: 11.50%
New Jersey is one of the states with income tax cuts in 2024. The US state’s 2.5% business tax surcharge on business income over $1 million has expired effective January 1. New Jersey’s top marginal corporate income tax rate is reduced to 9%, down from the country’s highest 11.50% top rate.
15. Pennsylvania
Corporate Income Tax in 2024: 8.49%
Corporate Income Tax in 2023: 8.99%
Pennsylvania had a flat income tax rate of 3.07%. In 2024, Pennsylvania’s corporate income tax rate was reduced to 8.49% from 8.99%. Pennsylvania is placed fifteen among the states with income tax cuts in 2024.
14. Kansas
Corporate Income Tax in 2024: 6.50%
Corporate Income Tax in 2023: 7%
Kansas has reduced its corporate income tax rate from 4% to 3.5% beginning in January 2024. The surtax rate of 3%, which applies to corporate income of over $50,000, remains unchanged. With this, the combined corporate income tax rate is reduced from 7% to 6.5%. Kansas is one of the states with income tax cuts in 2024.
13. South Carolina
Personal Income Tax in 2024: 6.40%
Personal Income Tax in 2023: 6.50%
South Carolina has reduced its top personal income tax rate from 6.50% to 6.40%. The state aims to reduce this rate further to 6%. Ranked thirteen on our list, South Carolina is one of the states with income tax cuts in 2024.
12. Montana
Personal Income Tax in 2024: 5.90%
Personal Income Tax in 2023: 6.75%
Montana passed Senate Bill 399 in 2021 which made various changes to the state’s tax code effective in 2024. Montana’s top personal income tax rate has been reduced from 6.75% to 5.90%. Montana is ranked among the states with income tax cuts in 2024.
11. Georgia
Personal Income Tax in 2024: 5.49%
Personal Income Tax in 2023: 5.75%
Georgia has ended its six personal income tax brackets into one at a rate of 5.49%. The rate will be reduced by 0.1% each year until it reaches 4.99%, subject to statutory delays. Georgia is ranked eleventh among the states with income tax cuts in 2024.
10. Missouri
Personal Income Tax in 2024: 4.80%
Personal Income Tax in 2023: 4.95%
Missouri is one of the states with income tax cuts in 2024. The state has reduced its top personal income tax rate to 4.80% from 4.95%.
9. Mississippi
Personal Income Tax in 2024: 4.70%
Personal Income Tax in 2023: 5%
Mississippi has adopted a single rate for personal tax purposes on income exceeding $10,000. The state has set this rate to 4.7%, down from 5%. Ranked ninth on our list, Mississippi is one of the states with income tax cuts in 2024.
8. North Carolina
Personal Income Tax in 2024: 4.50%
Personal Income Tax in 2023: 4.75%
North Carolina has set its personal income tax rate to 4.50%, down from 4.75%. The state aims to further reduce the tax in future years subject to revenue targets. North Carolina is ranked among the states with income tax cuts in 2024.
7. Kentucky
Personal Income Tax in 2024: 4%
Personal Income Tax in 2023: 4.50%
Kentucky has reduced its flat personal income tax rate from 4.50% to 4%. Kentucky is placed seventh among the states with income tax cuts in 2024.
6. Ohio
Personal Income Tax in 2024: 3.50%
Personal Income Tax in 2023: 3.99%
Ohio has set the top two marginal tax rates for individual income into one, reducing the rate from 3.99% to 3.50%. Ohio is one of the top states with income tax cuts in 2024.
Click here to see 5 States with Income Tax Cuts in 2024.
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Disclosure: None. 16 States with Income Tax Cuts in 2024 is originally published on Insider Monkey.