Updated June 2026Reviewed for Tax Year 2026
Best State for Business Owners (2026)
States ranked by combined business tax climate for 2026 — personal income, corporate, franchise, gross-receipts, and sales tax.
Most U.S. businesses are pass-throughs (LLCs and S-corps), so the owner's personal state income tax matters more than headline corporate rates. The table below sorts by personal income tax, with each state's corporate climate note. For C-corps, also weigh franchise, gross-receipts, and apportionment rules.
| # | State | Personal Income | Sales | Business Climate |
|---|---|---|---|---|
| 1 | New Hampshire | 0.00% | 0.00% | No sales tax, no broad income tax; 7.5% business profits tax. |
| 2 | Alaska | 0.00% | 1.80% | No state corporate income tax on most pass-throughs; oil-revenue dependent. |
| 3 | Wyoming | 0.00% | 5.44% | No personal or corporate income tax; mineral-revenue dependent. |
| 4 | South Dakota | 0.00% | 6.44% | No personal or corporate income tax; popular trust jurisdiction. |
| 5 | Florida | 0.00% | 7.00% | No personal income tax; 5.5% corporate rate; popular for relocation. |
| 6 | Nevada | 0.00% | 8.24% | No personal income tax; modified business tax on payroll over $50k/qtr. |
| 7 | Texas | 0.00% | 8.25% | No personal income tax; franchise (margin) tax 0.375–0.75% over $1.23M revenue. |
| 8 | Washington | 0.00% | 9.38% | No wage income tax; 7% capital-gains tax over $270k; B&O on gross receipts. |
| 9 | Tennessee | 0.00% | 9.56% | No personal income tax (Hall tax repealed); 6.5% franchise/excise on corps. |
| 10 | North Dakota | 2.04% | 7.04% | Top 2.5% bracket — lowest progressive top rate in the U.S. |
| 11 | Arizona | 2.50% | 8.40% | Flat 4.9% corporate rate; aggressive R&D credit. |
| 12 | Indiana | 3.05% | 7.00% | Flat 3.05% individual income tax; low corporate at 4.9%. |
| 13 | Pennsylvania | 3.07% | 6.34% | Flat 3.07% individual; retirement income largely exempt; 8.49% corporate, phasing to 4.99%. |
| 14 | Ohio | 3.50% | 7.25% | Top 3.5% bracket; CAT (Commercial Activity Tax) replaces corporate income tax. |
| 15 | Kentucky | 4.00% | 6.00% | Flat 4% individual rate; pension exclusion up to $31,110. |
| 16 | Michigan | 4.25% | 6.00% | Flat 4.25% individual; phasing out retirement-income tax through 2026. |
| 17 | Louisiana | 4.25% | 9.55% | Flat 3% individual (post-2025 reform); high combined sales rate. |
| 18 | Iowa | 4.38% | 6.94% | Flat 3.8% (2026) individual rate; phasing out retirement income tax. |
| 19 | Colorado | 4.40% | 7.80% | Flat 4.4% corporate and individual tax; TABOR caps revenue growth. |
| 20 | Arkansas | 4.40% | 9.40% | Top 4.3% corporate rate after recent cuts. |
| 21 | North Carolina | 4.50% | 6.99% | Flat 4.25% (2026), trending to 3.99% by 2027; 2.5% corporate, phasing out by 2030. |
| 22 | Alabama | 4.50% | 9.25% | Modest 6.5% corporate tax with manufacturing-friendly incentives. |
| 23 | Utah | 4.65% | 7.47% | Flat 4.55% individual + corporate; retirement-credit phaseout by AGI. |
| 24 | Mississippi | 4.70% | 7.07% | Flat 4.4% (2026) individual; retirement income fully exempt. |
| 25 | Oklahoma | 4.75% | 8.99% | Top 4.75% bracket; 4% corporate rate. |
| 26 | Missouri | 4.80% | 8.39% | Top 4.8% bracket; SS exclusion based on AGI. |
| 27 | New Mexico | 4.90% | 7.63% | Top 5.9% bracket; gross-receipts tax replaces sales tax. |
| 28 | Illinois | 4.95% | 8.88% | Flat 4.95% individual + 9.5% combined corporate; high property tax burden. |
| 29 | Massachusetts | 5.00% | 6.25% | Flat 5% individual + 4% surtax over $1M; 8% corporate. |
| 30 | West Virginia | 5.12% | 6.57% | Top 4.82% bracket (2026); SS fully exempt by 2026. |
| 31 | Wisconsin | 5.30% | 5.44% | Top 7.65% bracket; retirement-income subtraction up to $5k for 65+. |
| 32 | Georgia | 5.39% | 7.40% | Flat 5.39% individual + corporate; generous retirement exclusions over 62. |
| 33 | Kansas | 5.70% | 8.70% | Top 5.7% bracket; agricultural property carve-outs. |
| 34 | Virginia | 5.75% | 5.77% | Top 5.75% bracket; age deduction up to $12k for 65+. |
| 35 | Maryland | 5.75% | 6.00% | Top 5.75% state + local piggyback up to 3.2%. |
| 36 | Idaho | 5.80% | 6.20% | Flat 5.8% income tax; growing tech corridor in Boise. |
| 37 | Nebraska | 5.84% | 6.96% | Phasing top bracket down to 3.99% by 2027. |
| 38 | Montana | 5.90% | 0.00% | No sales tax; top 5.9% income bracket. |
| 39 | Rhode Island | 5.99% | 7.00% | Top 5.99% bracket; partial SS exclusion. |
| 40 | Connecticut | 6.00% | 6.35% | 7.5% corporate tax; estate tax up to 12%. |
| 41 | New Jersey | 6.37% | 6.63% | Top 10.75% bracket; corporate transit fee adds 2.5% over $10M. |
| 42 | South Carolina | 6.40% | 7.50% | Top 6.2% bracket; $10k retirement-income deduction. |
| 43 | Delaware | 6.60% | 0.00% | No sales tax; corporate franchise tax favors incorporation. |
| 44 | Vermont | 6.60% | 6.35% | Top 8.75% bracket; SS partially exempt by AGI. |
| 45 | District of Columbia | 6.75% | 6.00% | Top 10.75% bracket; 8.25% franchise tax on businesses. |
| 46 | New York | 6.85% | 8.53% | Top 10.9% bracket + NYC up to 3.876%; 7.25% corporate. |
| 47 | Maine | 7.15% | 5.50% | Top 7.15% bracket; pension exclusion up to $45,864. |
| 48 | Minnesota | 7.85% | 8.05% | Top 9.85% bracket; new NIIT-style investment surtax above $1M. |
| 49 | Hawaii | 8.20% | 4.50% | Top 11% income bracket; GET (4.5%) functions like a broad sales tax. |
| 50 | Oregon | 8.75% | 0.00% | No sales tax; top 9.9% bracket; CAT for businesses over $1M revenue. |
| 51 | California | 9.30% | 8.82% | 8.84% corporate tax — highest tier income at 13.3%; mental-health 1% surtax over $1M. |
Frequently Asked Questions
- Which state is best for incorporating?
- Delaware (corporate law), Wyoming (privacy + no franchise tax), and Nevada (no corporate income tax) lead for entity choice. For day-to-day operations, low personal income tax states often win.
- What about pass-through entities?
- For LLCs and S-corps the owner's personal tax rate dominates — so the 9 no-income-tax states are usually most favorable. Watch for franchise (TX), gross receipts (WA, OR), and CAT (OH) taxes.
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