The Tax Brief real effective rates for 111+ countries — bi-weekly, free.
TAX GUIDE

US State Tax Policy Hub 2026: TCJA, Reforms & State Rankings

Daniel · CountryTaxCalc Updated June 2026
Run the calculator → Jump to FAQ
KEY INSIGHT
The One Big Beautiful Budget Act (OBBBA) made TCJA provisions permanent in 2025, preventing the income tax and estate tax changes that would have taken effect in 2026. The 37% top federal rate, enhanced standard deduction, and estate tax exemption are now permanent. Nine states have no income tax. California's 13.3% top rate and New York's 10.9% remain the highest state rates. Use the guides below for specifics.
At a glance

Key Facts

OBBBA Made TCJA Provisions Permanent (2025)
The One Big Beautiful Budget Act (OBBBA), passed in 2025, permanently extended the key TCJA provisions that were set to expire on 31 December 2025. The 37% top federal income tax rate, the doubled standard deduction, the $10,000 SALT deduction cap, the enhanced Child Tax Credit structure, the 20% QBI deduction for pass-through businesses, and the elevated estate tax exemption are now permanent law. The estate tax exemption sunset that would have halved the exemption to approximately $7 million was prevented.
Nine States With No Income Tax
As of 2026, nine states impose no state income tax: Alaska, Florida, Nevada, New Hampshire (taxes interest and dividend income only, phase-out complete), South Dakota, Tennessee (taxes investment income only — fully phased out by 2022), Texas, Washington (7% capital gains tax applies — technically not an income tax by WA state law), and Wyoming. Residents of no-income-tax states still pay federal income tax, payroll taxes, and often higher property tax or sales tax compared to higher-income-tax states.
The SALT Cap and Itemised Deductions
The $10,000 cap on the federal deduction for State and Local Taxes (SALT) has remained in place under OBBBA. This cap most heavily affects residents of high-tax states such as California (where state income tax alone can be $50,000+ for high earners), New York, New Jersey, and Illinois — who previously deducted much larger SALT amounts on their federal returns. The SALT cap effectively raises the combined federal + state tax rate for high earners in high-tax states.
California and New York: Highest State Tax Rates
California has the highest state income tax rate in the US at 13.3% on income above $1 million (10.3% on income above $338,639). New York's top state rate is 10.9% on income above $25 million, with New York City adding up to 3.876% on top. Together, a high-earning New York City resident can face a combined federal + state + city marginal rate exceeding 50%. California uniquely taxes long-term capital gains at ordinary income rates — unlike the federal preferential rate system.
Introduction

US tax policy has been in a period of significant change. The Tax Cuts and Jobs Act (TCJA) of 2017 reshaped the federal tax code substantially, and the subsequent debate about whether those provisions would expire at the end of 2025 drove considerable planning activity. The One Big Beautiful Budget Act (OBBBA) resolved this uncertainty by making the key TCJA provisions permanent — but the policy landscape continues to evolve at both federal and state levels.

This hub aggregates every US federal and state tax policy guide on CountryTaxCalc — covering the legislative changes, no-income-tax state comparisons, and the specific state policy guides that affect decisions about where to live, work, and invest in the US.

Section 01

Federal Tax Policy: TCJA and OBBBA

The federal legislative changes that shaped US tax law in 2025–2026:

Section 02

No-Income-Tax States: Complete Guides

The nine no-income-tax states attract significant relocation interest — but the full tax picture involves more than the headline rate:

Section 03

Related Hubs

US state tax policy connects with the USA State Tax Hub and expat planning resources:

💡

CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools. Learn more about our affiliate partnerships

US Tax Filing

TaxHub

★ 4.8 verified reviews  ·  3,758 reviews

Navigate the updated 2026 federal and state tax rules — TaxHub handles individual and small business US tax returns with full coverage of TCJA-permanent provisions.

⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.

File Your US Tax Return →
US Expat Tax Specialist

Greenback Expat Tax Services

★ 4.8 Trustpilot  ·  1,625 reviews

Americans abroad still need to file US returns under the TCJA-permanent structure — FEIE limits, estate tax implications, and OBBBA provisions all apply to expat filers.

⚠ Not the cheapest option — best for complex situations and expats who want a dedicated CPA.

Get US Expat Tax Help →

Interested in reaching this audience? Advertise on CountryTaxCalc →

FAQ

Frequently Asked Questions

Did US income tax rates change in 2026?

No — the One Big Beautiful Budget Act (OBBBA), passed in 2025, made the TCJA income tax rates permanent, preventing the increases that would have taken effect had the TCJA expired. The 37% top federal rate, seven-bracket structure, and enhanced standard deduction ($15,000 single / $30,000 married filing jointly for 2025, inflation-adjusted) continue in 2026 and beyond. The pre-TCJA top rate of 39.6% that would have been restored by the sunset has been avoided.

Which US states have no income tax?

Nine states currently have no state income tax on wages and salaries: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Note that Washington state imposes a 7% capital gains tax on gains above $250,000 — though it is structured as an excise tax rather than an income tax. New Hampshire historically taxed interest and dividend income; this was fully phased out. Tennessee's Hall income tax on investment income was also phased out. Residents of these states still pay federal income tax plus payroll taxes, and often face higher property or sales taxes than high-income-tax states.

What is the SALT deduction cap and how does it affect me?

The State and Local Tax (SALT) deduction allows federal taxpayers who itemise deductions to deduct state income taxes, local income taxes, and property taxes paid. The TCJA capped this deduction at $10,000 per year — which has remained in place under OBBBA. The cap disproportionately affects residents of high-tax states (California, New York, New Jersey, Illinois) who previously deducted tens of thousands of dollars in SALT. For a California resident paying $80,000 in state income tax, they can only deduct $10,000 of that against federal tax — losing the deduction value on $70,000. This effectively raises the combined federal + state marginal rate for high earners in high-tax states.

What is the current US federal estate tax exemption in 2026?

Under OBBBA, the elevated estate tax exemption created by the TCJA was made permanent. The exemption for 2025 is approximately $13.99 million per person (inflation-adjusted), with a married couple able to transfer $27.98 million free of federal estate tax using portability. The 40% top federal estate tax rate applies on taxable estates above the exemption. The feared 'sunset cliff' — where the exemption would have roughly halved in 2026 if the TCJA expired — was avoided by OBBBA. Some states have separate, lower estate tax exemptions (Maryland, Massachusetts, Oregon) that remain in place regardless of the federal change.

Is California really the highest-tax state?

California has the highest state income tax top marginal rate (13.3% on income above $1 million; 10.3% on income above $338,639) and uniquely taxes long-term capital gains at ordinary income rates — unlike the federal preferential rate system. However, whether California is the 'highest-tax state' for a given individual depends on their income mix, property ownership, and consumption patterns. California also has relatively high property taxes in absolute dollar terms (though the Prop 13 rate cap is 1% of assessed value) and a baseline sales tax of 7.25%. For high-income earners with significant capital gains or wage income, California consistently produces the highest combined federal + state marginal rate. New York City residents also face a combined federal + state + city marginal rate exceeding 50% at high income levels.
Disclaimer:US federal and state tax law changes frequently. The One Big Beautiful Budget Act (OBBBA) information in these guides reflects the legislation as passed in 2025. Individual guide pages are updated at the dates shown. This hub provides general educational information only — not tax or legal advice. For personal tax planning decisions, consult a qualified US tax adviser or CPA.
Keep reading

Related Guides

GUIDE
TCJA Sunset 2026: What Actually Happened
GUIDE
Income Tax Rates 2026: OBBBA Made TCJA Permanent
GUIDE
Trump Tax Cuts Extension 2026
GUIDE
States With No Income Tax 2026
GUIDE
Florida No Income Tax 2026: Full Breakdown
GUIDE
Texas No Income Tax 2026: Full Breakdown
GUIDE
Child Tax Credit 2026 Changes
GUIDE
Estate Tax Exemption Dropping: TCJA Planning Guide
GUIDE
USA State Tax Guides Hub
GUIDE
Capital Gains Tax Hub
GUIDE
Wealth, Inheritance & Estate Tax Hub
From the brief
PT38.4%−9.6 vs. headline
CY17.8%incl. 60-day rule
AE 0.0%substance required
The Tax Brief · Subscribe free

More like this, every two weeks.

Verified rates, real after-tax figures, plain English. Free.

Bi-weekly. No spam. Unsubscribe in one click.