Thirteen states will cut income taxes in 2026. Here’s what this tax cut means for housing demand, relocation buyers and agents on both sides of this trend.
Timing is critical for a housing market still looking for demand, with 13 states planning to cut income taxes in 2026.
Arkansas was the most recent addition to that list last month, when Gov. Sarah Huckabee Sanders called a special fiscal session and lowered the state’s top tax rate from 3.9% to 3.7%.
The move would put Arkansas joining Georgia, Indiana, Kentucky, Mississippi, Montana, Nebraska, North Carolina, Ohio, Oklahoma, South Carolina, Utah and West Virginia in a wave of state-level tax cuts taking effect this year, according to a new analysis from the National Taxpayers Union Foundation.
This would result in 13 states cutting their income taxes in one calendar year. For context, the average annual rate cut over the past decade has been much smaller.
another row on the spreadsheet
The impact on real estate is no accident. State tax policy is one of the cleaner inputs when people choose where to live and buy.
The states on this year’s list are heavily skewed toward the same Sunbelt and inland markets that absorbed the bulk of pandemic-era immigration, with South Carolina, Georgia, and North Carolina each receiving rate cuts. Utah, Montana, and Oklahoma also cut income taxes this year after experiencing large population increases from 2020 to 2025.
For households already considering relocation, lower income tax rates are another item on the spreadsheet. And in an environment where affordability remains the primary constraint on buyer demand, states that maintain high take-home wages have a structural advantage in hiring.
Businesses bring in workers. workers buy houses
Five of the 13 states (Kentucky, Mississippi, Oklahoma, South Carolina, and West Virginia) have formal trigger-based mechanisms for further income tax reductions, with a path toward a statutory zero. This is a noteworthy long-term signal for a housing market that plans on multi-year cycles.
A clear path to zero income tax would change the calculations that determine where companies set up factories. Businesses bring in workers, and workers buy homes.
The NTUF analysis makes that point clear. Companies plan when they have enough information to make long-term plans. States that move toward zero income taxes are states that businesses can model after.
That’s most important in Sunbelt metropolitan areas, which are still absorbing corporate relocation. Nashville is already getting its share of immigrants. Charlotte, North Carolina is catching up.
2225 was Charlotte’s best year for corporate hiring in a decade, with 15 projects announced, representing approximately 3,900 new jobs and more than $424 million in new investment.
Explosive population growth is also being seen in Charlotte, a state with significant population growth. The U.S. Census Bureau estimates that the city’s population grew by 10.3% between 2020 and 2025.
Not all tax cuts are catalysts.
Not every market on this list is a growth story, and it’s more complicated for real estate agents.
Mississippi and West Virginia are notable exceptions. Both lowered income taxes this year, resulting in population declines of 0.2% and 1.5%, respectively, from 2020 to 2025, according to Census Bureau estimates.
Ohio’s cuts, from its top tax rate of 3.5% to a new flat rate of 2.75%, are the most aggressive on this year’s list in terms of size. However, Ohio saw a modest population growth of 0.9% between 2020 and 2025.
In other words, income tax cuts are not necessarily a rising tide. It can be a slight tailwind in a market where fundamentals already favor buyers, or it can be a subtle signal in a market where supply constraints are a binding issue.
Meanwhile, in California and Washington
The flip side of this trend is happening simultaneously, and real estate professionals need to look in both directions.
Washington state recently enacted a 9.9% tax on household income over $1 million a year, with collection set to begin in 2029.
California is right behind us. Supporters of a ballot measure that would impose a one-time 5% wealth tax on billionaires submitted 1.55 million signatures in late April, nearly double the threshold needed to put it on the November 2026 ballot.
If migration data from the past decade are any guide, both are moves that have the potential to accelerate out-migration, with direct implications for housing demand in host markets.
For now, the story is more complicated. The Census Bureau estimates that California’s population declined by 0.5% between 2020 and 2025, while Washington state’s population grew by 3.8% over the same period.
Real estate agents in tax-exempt states need to keep this trend in mind when bringing in relocation buyers. For real estate agents in states going in other directions, it’s worth having a conversation with sellers about what demand will be in that price range in two or three years.
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