What’s new in Utah for 2026: a 4.45% rate, a bigger child credit, and the federal deductions that never arrive

The 2026 Utah return is last year’s return with a lower rate and a few more dollars of credit. Senate Bill 60 of the 2026 General Session cut the flat rate from 4.5% to 4.45%, retroactive to January 1, 2026. House Bill 290 raised the income lines on the $1,000 per-child credit for children under six by $7,000 for a joint return. House Bill 77 made the pass-through entity tax permanent and repealed the estate tax chapter that had collected nothing since 2005. The federal tax law of July 2025 did the rest, and it did it unevenly. The permanently higher federal standard deduction and 100% bonus depreciation flow straight into the Utah return under the state’s rolling conformity. The new federal deductions for tips, overtime, seniors and car-loan interest do not reach Utah at all, and the Legislature passed nothing to change that.

The reason for the unevenness is where each federal item sits on the Form 1040. Utah’s Form TC-40 starts from federal adjusted gross income, line 11. Anything that changes AGI, such as bonus depreciation on a Schedule C or an above-the-line IRA deduction, changes the Utah return automatically. The federal standard and itemized deductions sit below AGI, and they reach Utah only through the taxpayer tax credit, which is worth 6% of them. The tips, overtime, senior and car-loan deductions sit below even that, on the new federal Schedule 1-A, outside both the standard deduction and the itemized deductions. They change federal taxable income and nothing else. The Tax Commission’s January 15, 2026 practitioner webinar said it plainly: these deductions “will have no effect on the Utah return as they are a ‘below the line’ deduction.”

The rate: 4.45%

S.B. 60 took effect May 6, 2026, with retrospective operation for taxable years beginning on or after January 1, 2026. The individual rate and both corporate rates moved from 4.5% to 4.45%. It is the sixth cut in six years: 4.95% through 2021, 4.85% for 2022, 4.65% for 2023, 4.55% for 2024, 4.5% for 2025, 4.45% for 2026. On $80,000 of Utah taxable income the 2026 cut is worth $40. Withholding tables were revised for pay periods beginning June 1, 2026 (verify), so the first five months of the year were withheld at the old rate; the difference washes out on the return.

Several Utah credits are defined as “the tax rate times” an amount, so the cut trims them too. The Social Security benefits credit, the military retirement credit and the my529 credit are all computed at 4.45% for 2026. A couple with $20,000 of taxable Social Security benefits under the income threshold gets an $890 credit instead of $900; the Utah tax on those benefits fell by the same $10, so the net is zero. The my529 credit covers contributions up to $2,560 per beneficiary on a single return and $5,120 on a joint return, a maximum credit of $113.92 or $227.84, up from $112.05 and $224.10 for 2025 because the contribution cap is indexed.

The child tax credit reaches more families

Utah’s child tax credit is $1,000, nonrefundable, for each qualifying child who is under six on December 31 and for whom the federal child tax credit is allowed. It phases out at 10 cents for every dollar of modified adjusted gross income above a threshold, so it is gone $10,000 above the line for one child and $20,000 above it for two. H.B. 290, effective May 6, 2026 and retroactive to January 1, raised the thresholds from $27,000 to $30,500 for married filing separately, from $43,000 to $49,000 for single and head of household, and from $54,000 to $61,000 for joint returns. The credit amount and the age limit did not change. The Legislature’s fiscal analyst estimated about 18,300 taxpayers would save an average of $388 beginning in tax year 2026. The thresholds are not indexed.

The taxpayer tax credit and the federal standard deduction

Utah has no standard deduction and no itemized deductions of its own. In their place the taxpayer tax credit, Utah Code 59-10-1018, gives 6% of the federal standard deduction you took, or 6% of your federal itemized deductions minus the state and local income tax you deducted, plus 6% of a Utah personal exemption for each qualifying dependent, and shrinks by 1.3 cents for every dollar of Utah taxable income above an indexed threshold. For 2025 the exemption was $2,111 per dependent and the thresholds were $18,213 single or married filing separately, $27,320 head of household and $36,426 joint (verify); the 2026 figures are to come in December. The full mechanism is in How Utah income tax works.

This is where the 2025 federal law helps Utah filers most. The federal standard deduction was made permanently larger, $16,100 single and $32,200 joint for 2026, and 6% of a larger number is a larger credit: $1,932 for a joint return before phase-out, against $1,890 on the 2025 figure of $31,500 (verify). H.B. 77 restated the credit “to align with federal tax changes,” applying from January 1, 2026; the posted statute still reads 6% of the standard or itemized deduction, less state and local income tax, excluding the qualified business income deduction, plus 6% of the personal exemption, so the mechanics for an ordinary filer are unchanged. The extra federal standard deduction for age 65 flows through, because it is part of the standard deduction figure. The new $6,000 senior deduction does not, because it is a separate deduction below the line, and neither does the non-itemizer charitable deduction that starts federally in 2026.

Tips, overtime, seniors and car loans: no change, and that is the news

A server with $12,000 of tips, a nurse with $9,000 of overtime premium pay and a 68-year-old with the $6,000 senior deduction all owe Utah tax on those amounts at 4.45% exactly as they did in 2025. None of it requires an add-back on the TC-40, because none of it ever left federal AGI. No bill in the 2026 General Session created a Utah subtraction for any of the four (verify against the final 2026 TC-40 instructions). When Utah is described as having “conformed” to the federal law, that means the starting number is federal AGI; it does not mean every federal deduction counts here.

Businesses and pass-through owners

Bonus depreciation flows through. Utah Code 59-10-103 adopts the Internal Revenue Code “as amended from time to time,” and Utah has no depreciation decoupling. The 100% bonus depreciation restored by the federal law, the return of immediate expensing for domestic research costs, the higher Section 179 limit and the looser Section 163(j) interest limit all reduce federal AGI and therefore Utah taxable income, with no Utah adjustment and no separate Utah depreciation schedule.

The pass-through entity tax is permanent. Utah Code 59-10-1403.2 lets a partnership or S corporation elect to pay Utah income tax at the entity level, so the owners get a federal deduction for it outside the SALT cap and then claim a Utah credit (TC-40A code AP) for their share. The election was set to expire for taxable years after 2025. H.B. 77 (Chapter 299, 2026) amended the section, applying from January 1, 2026, and removed the termination. The owner-level credit carries forward ten years, up from five, under H.B. 60 of 2025.

The SALT cap and the Utah credit. For an individual who itemizes federally, the higher cap raises itemized deductions, and 6% of the increase flows into the taxpayer tax credit, with one subtraction: Utah strips state and local income tax out of the itemized figure before applying the 6%. Property tax stays in. So the cap increase helps a Utah itemizer only to the extent the new room is filled with property tax.

Smaller changes on the 2026 return

• Who is exempt from Utah tax. H.B. 60 (2025), effective January 1, 2026, changed the “qualified exempt taxpayer” test on TC-40 line 21. The old test compared federal AGI with the federal standard deduction. The new one compares Utah modified AGI (federal AGI plus Utah additions, minus Utah subtractions) with the federal standard deduction plus the Utah personal exemptions, leaving out the extra standard deduction for age and blindness. The 2026 worksheet is not yet published; the Tax Commission’s page still shows the old test with 2024 figures.
• A new subtraction for repaid Social Security. If you repaid in 2026 benefits that Utah taxed in an earlier year, claim the federal repayment credit, and did not claim the Utah Social Security credit for the year you received them, the repayment is a subtraction on TC-40A Part 2 (H.B. 60, 2025).
• Interest on amended-return refunds capped. For interest accruing on or after January 1, 2026, the Tax Commission pays no more than $100 of interest per calendar year on an amended-return overpayment, unless the overpayment was its own error.
• 1099-K data comes to Utah. Payment processors that file federal Forms 1099-K must send the same information to the Tax Commission for payees with Utah addresses. Gig and marketplace income will be matched.
• Powers of attorney must be notarized. Form TC-737 received on or after February 1, 2026 must be notarized; IRS Form 2848 is not accepted. Existing powers on file remain valid.
• Estate tax chapter repealed. H.B. 77 repealed Title 59, Chapter 11, the pick-up estate tax that had been dormant since 2005. Utah has no estate, inheritance or gift tax; only the federal estate tax applies.
• Residential energy credits. H.B. 264 (2025) phases out the residential clean energy credits for systems placed in service before January 1, 2028; which codes remain on the 2026 TC-40A is to come (verify).
• Indexed figures to come. The 2026 Utah personal exemption, the taxpayer tax credit thresholds, and the Circuit Breaker limits are published in December with the 2026 forms.

What was on the November 3, 2026 ballot

No income tax question was on the ballot. Constitutional Amendment B, referred by the Legislature, was rejected, about 62% to 38%. It would have required a 60% yes vote, rather than a simple majority, for a citizen initiative that creates a new tax, expands an existing tax, raises a rate, or reduces property tax rates by less than current law would. It would have changed no rate and no credit, only how hard it is for voters to change them by initiative; a tax initiative still passes with a simple majority. Amendment A concerns how proposed constitutional amendments are published and has no tax content.