The 10 Lowest Income Tax States in 2026
North Dakota has the lowest income tax rate among states that levy income tax at 1.95% flat. Arizona follows at 2.5%. But watch the local income taxes: Indiana, Pennsylvania, and Ohio have low state rates but high municipal taxes that can double the total burden.
Want zero income tax? That's a different list.
This page covers states that do levy income tax but at low rates. The 9 states with no income tax at all (AK, FL, NV, NH, SD, TN, TX, WA, WY) are covered at /no-income-tax-states and in depth at noincometaxstates.com.
Lowest Income Tax States (2026)
| # | State | Top Rate | Type | Effective @ $75K | Effective @ $100K | Local Tax? | Notes |
|---|---|---|---|---|---|---|---|
| 1 | North Dakota | 1.95% | Flat | 1.6% | 1.7% | No | Lowest income tax rate in the country among states that levy income tax. Oil revenue funds services. |
| 2 | Arizona | 2.5% | Flat | 2.1% | 2.2% | No | Transitioned from graduated brackets to flat 2.5% in 2023. One of the sharpest rate cuts in recent history. |
| 3 | Indiana | 3.05% | Flat | 2.7% | 2.8% | Yes | Low state rate but every Indiana county levies a local income tax. Combined rate typically 3.5-5%. |
| 4 | Pennsylvania | 3.07% | Flat | 2.7% | 2.8% | Yes | Very low state rate but significant local income taxes. Philadelphia residents face 6.82% combined. |
| 5 | Mississippi | 4.4% | Flat (reducing) | 3.8% | 3.9% | No | Reduced from 4.7% to 4.4% in 2026, heading toward 3.5% by 2030. |
| 6 | Kentucky | 4.0% | Flat | 3.6% | 3.7% | Yes | Transitioned to flat 4% in 2018. Louisville Metro charges 2.2% occupational tax. |
| 7 | Iowa | 3.9% | Flat (new in 2026) | 3.4% | 3.6% | Yes | Completed transition from graduated (was 8.53%) to flat 3.9% in 2026. Major change. |
| 8 | Ohio | 3.75% | Graduated | 3.1% | 3.3% | Yes | Low state rate. Income below $26,050 is exempt. But most Ohioans pay 2.5% municipal tax on top. |
| 9 | Colorado | 4.4% | Flat | 3.9% | 4.0% | No | Clean flat rate, no local income tax. Denver has no city income tax. |
| 10 | Michigan | 4.05% | Flat | 3.6% | 3.7% | Yes | Flat 4.05% state rate. Detroit and 23 other Michigan cities levy municipal income taxes. |
Effective rates for single filers with standard deduction. Local tax column indicates whether cities or counties in the state levy additional income taxes. Source: state DORs, Tax Foundation. April 2026.
Watch Out: Low State Rate Does Not Mean Low Total Income Tax
Indiana has a 3.05% flat state rate, one of the lowest in the country. But all 92 Indiana counties levy a county income tax ranging from 0.5% to 3.13%. A resident of Marion County (Indianapolis) pays 3.05% state plus 2.02% county, totaling 5.07%. Pennsylvania's 3.07% state rate is similarly low on paper, but Philadelphia residents face 6.82% combined. Always check local income taxes. See the full local income tax guide.