6 Places Where Income Taxes Will Drop in 2026 — and Others With Smaller Cuts

Understanding the Impact of the One Big Beautiful Bill Act of 2025

The recent passage of the One Big Beautiful Bill Act of 2025 has had a significant effect on U.S. taxpayers, offering relief and new opportunities for financial planning. This legislation made permanent many of the tax changes introduced by the Tax Cuts and Jobs Act of 2017, while also introducing additional tax cuts that have varying impacts depending on where individuals live.

One of the most notable changes is the increase in the deduction limit for state and local taxes, which has been raised from $10,000 to $40,000. This adjustment benefits residents in areas with higher property taxes more than those in regions with lower tax burdens. As a result, the overall impact of the law varies significantly across different states and counties.

State-by-State Tax Impacts

According to an analysis by the Tax Foundation, federal income taxes for individual taxpayers are expected to decrease in every state in 2026 due to the new legislation. The states with the most substantial average tax reductions include:

• Wyoming: An average decrease of $5,375 per individual taxpayer.
• Washington: An average decrease of $5,372 per individual taxpayer.
• Massachusetts: An average decrease of $5,139 per individual taxpayer.

In contrast, the states with the smallest average tax cuts are:

• West Virginia: An average decrease of $2,503 per individual taxpayer.
• Mississippi: An average decrease of $2,401 per individual taxpayer.

These differences highlight how the law's provisions can affect various regions differently based on local economic conditions and tax structures.

County-Level Variations

When looking at county-level impacts, the Tax Foundation identified three locations that will see the largest average tax cuts. These areas, all located in mountain resort towns, include:

• Teton County, Wyoming: An average decrease of $37,373 per individual taxpayer.
• Pitkin County, Colorado: An average decrease of $21,363 per individual taxpayer.
• Summit County, Utah: An average decrease of $14,537 per individual taxpayer.

The large tax cuts in these areas are likely due to the presence of many high-income earners and business owners. In contrast, rural counties tend to see smaller tax reductions. For example, Loup County, Nebraska recorded the smallest average tax cut of just $824.

National Average Tax Cut

Taking into account all individual tax filers nationwide, the average tax cut per taxpayer is expected to be $3,752 in 2026. However, this figure is not static. Some of the tax breaks included in the new legislation, such as deductions for tips, overtime pay, and seniors, are temporary and will expire in a few years. As a result, the national average tax cut is projected to drop to $2,505 in 2030.

Despite this decline, the Tax Foundation predicts that the average tax cut will rise again to $3,301 in 2035. This increase is expected as the permanent tax cuts in the law grow in value due to inflation adjustments.

Financial Opportunities

For those looking to maximize their financial gains, there are opportunities to benefit from the new tax environment. For instance, some high-interest bank accounts offer attractive returns and sign-up bonuses. One such option is a checking-and-savings account from SoFi, which provides up to 4.50% APR—significantly higher than the national average. Additionally, users may receive a cash bonus of up to $300 simply for signing up with direct deposit.

This type of financial opportunity highlights the importance of staying informed about tax laws and exploring ways to optimize personal finances. By understanding the implications of the One Big Beautiful Bill Act and taking advantage of available resources, taxpayers can make more informed decisions about their financial future.