Most US states impose a state income tax, which you pay extra to the federal income tax. But if you live in one of those states, you might be lucky enough to see a reduction in the tax rate in 2025.

Tax rates vary from state to state, but they always involve collecting a portion of your income from each paycheck. The percentage collected may vary depending on where you live and how much do you earn?. The highest rate in the US is 13.3% collected in California from those who earn more than $1 million a year, while states including Alaska, Florida and Nevada collect no income tax.

If you live in one of nine specific states, however, you’ll likely see a small increase in your take-home pay, after lawmakers in those states cut their income tax rates on Jan. 1. Some these cuts are small, while others are somewhat larger.

Read on for all the details on which states are lowering their income tax rates and by how much. For more on tax season, check out if you are eligible to claim child tax credit and look what the future holds for credit and its value.

Which states are lowering their tax rates?

Since Jan. 1, the income tax cuts took effect in the following nine states:

• Indiana
• Iowa
• Louisiana
• Mississippi
• Missouri
• Nebraska
• New Mexico
• North Carolina
• West Virginia

How much is the tax deduction in these states?

Indiana One of the smallest cuts was seen, with the income tax rate reduced from 3.05% to 3% in 2025.

Iowa reduced to a flat income tax rate of 3.8% in 2025, from the high rate of 5.7% last year.

Louisiana also moved to a flat rate from a graduated income tax system, with a flat rate of 3% this year, from a top rate of 4.25% in 2024. Those in the state’s largest income bracket, $30,000 -$40,000, pay only $338 a year in income tax.

This is Mississippi The tax rate sees a slight cut for 2025, down to 4.4% from 4.7% last year. Officials there have also set a goal of eventually eliminating state income taxes entirely.

Missouri is another state with a smaller cut this year, to 4.7% from 4.8%.

in Nebraska The income tax rate was cut to 5.2%, from 5.84% last year.

New Mexico It will retain its graduated tax rate, with two of its six income brackets decreasing by 2025. Those earning less than $5,500 a year will see their rate cut to 1.5% from 1.7%, while those making between $16,500 and $33,500 saw theirs cut to 4.3% from 4.7%.

in North Carolina The rate decreased to 4.5%, from 4.75% last year. The state also plans to cut the rate to 3.99% in 2026.

on West Virginiaresidents can expect to pay 4% less in total income tax by 2025, although specific rates have not yet been reported. The state is another where lawmakers have also set the goal of eventually eliminating income taxes.

For more, find out if you qualify for the saver’s credit.