4 States Where Income Taxes Will Be Lower Next Year

A young woman smiles while holding a fan of cash and giving the thumbs-up gesture
Photo by Krakenimages.com / Shutterstock.com

Nobody likes to pay taxes. But residents of several states can take comfort in the knowledge that their burden may be a little lower when they pay their taxes next year.

Four states have reduced individual tax rates for 2020, the Tax Foundation reports. Another four states have increased their estate tax exemptions.

According to the nonprofit, the following states reduced some or all of their income tax rates effective Jan. 1, meaning these change will affect the state tax returns that residents file by Tax Day 2021.

1. Arkansas

Arkansas’ top tax rate on middle-income earners — meaning taxpayers with a total income between $22,000 and $79,300 — is now 5.9% (down from 6% for 2019).

The top tax rate on high-income earners — meaning taxpayers with a total income of more than $79,300 — is 6.6% (down from 6.9%). The number of tax brackets for high-income earners also has been reduced to four (down from six).

For all of Arkansas’ 2020 tax rates, see the table titled “Arkansas Individual Income Tax Rates (2020).”

2. Massachusetts

Massachusetts has a single income tax rate, meaning all taxpayers pay the same rate, regardless of how much money they earn.

That single rate is now 5% (down from 5.05% for 2019).

3. Tennessee

Tennessee is among a handful of states that do not tax wage income. It only taxes interest and dividend income — although that tax is being phased out, as we detail in “How All 50 States Tax Your Retirement Income.”

As part of that phase-out, Tennessee’s tax rate for interest and dividends is now 1% (down from 2% for 2019).

4. West Virginia

West Virginia is phasing out its income tax on Social Security benefits for taxpayers with income of:

  • $100,000 or less, if their tax-filing status is married filing jointly
  • $50,000 or less, if they have any other tax-filing status

As part of this phase-out, 35% of a qualifying taxpayer’s benefits are now exempt from income taxes.

Other state tax changes

The Tax Foundation notes that 2020 will be an active one for changes to tax codes in many states.

For example, the following states have increased their estate tax exemptions, meaning fewer estates will be subject to taxation:

  • Connecticut
  • Minnesota
  • New York
  • Vermont

When applicable, estates are taxed based on the total value of everything a person owns at the time of his or her death, as we detail in “17 States With Inheritance or Estate Taxes — or Both.” However, estate taxes generally only apply to large fortunes, such as those worth millions of dollars.

But the news is not all good for large estates: Hawaii has added a new tax bracket that will require estates valued at more than $10 million to be taxed at a 20% tax rate.

Federal tax changes

Looking for more good tax news about 2020? We’ve found it for you.

Limits for two federal income tax credits will rise this year, the IRS says. For more, check out “Limits for These 2 Tax Credits Rise for 2020.”

In addition, four federal tax breaks that were slated to expire instead have been extended through at least this year. You can learn about them in “4 Expiring Tax Breaks Extended Through 2020.”

How to earn $30 in less than 30 seconds

Earn extra money by using Rakuten (formerly known as Ebates) — a site that gets you cash back at more than 2,500 stores. As a bonus for joining Rakuten between now and Aug. 6, 2020, you'll earn $30 when you spend at least $30 shopping online through Rakuten within the first 90 days. Start earning cash back and claim a free $30 bonus today.

Read Next
8 Key Steps to Planning for Retirement as a Couple
8 Key Steps to Planning for Retirement as a Couple

Ready for retirement? Not so fast. You might be surprised at some of the issues that come up for couples when they plan.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you stashes of cash. Here’s how to get there.

5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

9 Affordable Products That Could Save Your Life
9 Affordable Products That Could Save Your Life

Some of these products you may already own. Others you’ll want to order from Amazon ASAP.

6 Tech Gadgets That Make Your Daily Life Easier
6 Tech Gadgets That Make Your Daily Life Easier

These products on Amazon will ease your worries and simplify your routine.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
Will I Get My Ex-Husband’s Social Security When He Dies?
Will I Get My Ex-Husband’s Social Security When He Dies?

Two factors determine how much money is coming to you.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

16 Amazon Purchases That We Are Loving Right Now
16 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

5 Household Disinfectants That Can Destroy the Coronavirus
5 Household Disinfectants That Can Destroy the Coronavirus

You likely already have some of these products at home.

22 Things You Should Always Buy at a Dollar Store
22 Things You Should Always Buy at a Dollar Store

The dollar store has great bargains on these purchases.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You probably don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

6 Reasons I Will Never Trust Suze Orman
6 Reasons I Will Never Trust Suze Orman

Beware: The self-proclaimed personal finance expert has a track record that suggests more sizzle than steak.

America’s Most Reliable Appliance Brand Is a Surprise
America’s Most Reliable Appliance Brand Is a Surprise

Have you heard of this appliance manufacturer?

The Top 11 Jobs That Employers Want Retirees to Do
The Top 11 Jobs That Employers Want Retirees to Do

Tired of age discrimination? Businesses are clamoring for older workers to fill certain roles.

This Type of Social Security Benefit Is Often Overlooked
This Type of Social Security Benefit Is Often Overlooked

The Social Security Administration is not helping certain people get money to which they are entitled, a report says.

9 Everyday Problems You Can Solve With Vaseline
9 Everyday Problems You Can Solve With Vaseline

Forget expensive specialty products. Good ol’ petroleum jelly can address many common annoyances.

Getting These 2 Shots Could Reduce Your Risk of Dementia
Getting These 2 Shots Could Reduce Your Risk of Dementia

These vaccines may lower the risk of Alzheimer’s disease by up to 40%.

19 Purchases That Buyers Almost Always Regret
19 Purchases That Buyers Almost Always Regret

Think twice before buying these things.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

8 of the Worst Things to Buy at a Dollar Store
8 of the Worst Things to Buy at a Dollar Store

Not everything sold at dollar stores is a great bargain or a safe purchase. Here’s our list of products to avoid.

41 Things You Should Never Buy
41 Things You Should Never Buy

Some purchases are just plain dumb. Give yourself — and your budget — a break. Don’t spend money on this stuff.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

9 Things That Are Free in August
9 Things That Are Free in August

As summer enters the home stretch, we’ve rounded up these sizzling freebies.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.