On March 26, 2025, Utah Governor Spencer Cox signed into law H.B. 106 which, retroactive to January 1, 2025, lowers the state's personal and corporate income tax rate from 4.55% to 4.5%.

This is the fifth consecutive year that Utah has lowered the personal income tax rate, most recently in 2024 where S.B. 69 lowered the personal income tax rate from 4.65% to 4.55% retroactively to January 1, 2024. (See Tax Alert 2024-1845.)

The reduction in the individual and corporate income tax rates is anticipated to reduce income taxes for individuals and businesses by an estimated $118 million in FY 2026 and $97 million in FY 2027 in aggregate.

Employer childcare tax credit

Also under HB 106, and effective January 1, 2025, employers with qualified childcare expenditures may be eligible to claim a nonrefundable income tax credit equal to 10% of qualified childcare expenditures and 20% of the expenditures to acquire, construct, rehabilitate or expand property for a qualified childcare facility.

Ernst & Young LLP insights

The Utah Tax Commission typically updates its withholding formula and tables in June. Once available, the updated withholding instructions will be available here.