Often overshadowed by their tax time counterpart – the federal income tax – state income tax rates generally receive less attention. However, they can definitely impact your overall bill, depending on where you live, where you work, and the total amount you earn.
State Taxation of Residents
States typically use one of three methods to tax residents or workers on their income:
- They impose no income tax at all
- They tax a flat rate. All income, or dividends and interest only in certain situations, are taxed at the same rate
- The tax progressively, meaning higher amounts of income have higher rates of taxation.
If you work and live in the same state, which is the most common scenario, you will only have to file a single state return each tax season. This changes if you moved to a different state at some point throughout the year, or if you lived in a different state from the one in which you work. You may also need to file multiple state returns if you have income-producing rental properties in several different states. You will have to pay to file each state, as most software only includes tax prep for a single state, so you may end up paying more if you have to file multiple states.
You can deduct some or all your federal taxes on your state return in the following states:
- Alabama
- Iowa
- Louisiana
- Missouri
- Montana
- Oregon
States Without Income Tax
There are seven states that do not tax residents on the earnings they make. These include:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
In many cases, property taxes, sales taxes, and other fees may be higher in these areas, so don’t rush off to a state without income tax in hope that it’s cheaper.
States with Flat Tax
There are ten states which impose a flat tax rate to residents’ income. Different definitions of income apply to each state. For example, New Hampshire and Tennessee do not tax regular income, but interest and dividends are taxed at a flat rate. Some states use taxable income, and some use adjusted gross income to determine that amount to be taxed. The states with a flat tax rate are:
- Colorado 63%
- Illinois 75%
- Indiana 30%
- Massachusetts 10%
- Michigan 25%
- New Hampshire (dividends and interest only) 5%
- North Carolina 75%
- Pennsylvania 07%
- Tennessee* (dividends and interest only) 6%
- Utah 5%
States with Progressive Tax
The 33 additional states and the District of Columbia apply taxation of income the same way as the federal government. The higher the level of income, the higher the tax.
For example, a single taxpayer on the federal level pays 10% on the first $9,275 of income, 15% between $9,276 and $37,650, and 25% between $37,651 and $91,150. The rates continue at 28%, 33%, 35% and 39.6% at income above $415,051.
In most cases, state tax rates are lower than the federal, ranging between 1% and 9%. There are even some states where the first thousand dollars of income is taxed at 0%. Even at the high end, the tax is only 12%, but that is in addition to property, sales, utility, fuel, and federal taxes.
Use the table below to determine the number of tax brackets for each state and D.C., as well as the income amounts for single filers. Most of the time, the income bracket doubles for joint returns. Similar to the federal system, taxation is related to your marital status, your dependents, and any deductions or credits you may have.
State Tax rates # of brackets Income (single)
Alabama 2-5% 3 $500-3,001
Arizona 2.59-4.54% 5 $10,163-152,434
Arkansas 0.9-6.9% 6 $4,299-35,100
California 1-12.3% 9 $7,850-526,443
Connecticut 3-6.99% 7 $10,000-500,000
Delaware 0-6.6% 7 $2,000-60,001
District of Columbia 4-8.95% 4 $10,000-350,000
Georgia 1-6% 6 $750-7,001
Hawaii 1.4-8.25% 9 $2,400-48,000
Idaho 1.6-7.4% 7 $1,452-10,890
Iowa 0.36-8.98% 9 $1,554-69,930
Kansas 2.7-4.6% 2 Under/over $15,000
Kentucky 2-6% 6 $3,000-75,001
Louisiana 2-6% 3 $12,500-50,001
Maine 5.8-7.15% 3 $21,050-37,500
Maryland 2-5.75% 8 $1,000-250,000
Minnesota 5.35-9.85% 4 $25,180-155,651
Mississippi 3-5% 3 $5,000-10,001
Missouri 1.5-6% 10 $1,000-9,001
Montana 1-6.9% 7 $2,300-17,100
Nebraska 2.46-6.84% 4 $3,050-29,460
New Jersey 1.4-8.97% 6 $20,000-500,000
New Mexico 1.7-4.9% 4 $5,500-16,001
New York 4-8.82% 8 $8,450-1,070,350
North Dakota 1.1-2.9% 5 $37,650-413,350
Ohio 0.495-4.997% 9 $5,200-208,500
Oklahoma 0.5-5% 6 $1,000-7,200
Oregon 5-9.9% 4 $3,350-125,000
Rhode Island 3.75-5.99% 3 $60,850-138,300
South Carolina 0-7% 6 $2,920-14,600
Vermont 3.55-8.95% 5 $37,450-411,500
Virginia 2-5.75% 4 $3,000-17,001
West Virginia 3-6.5% 5 $10,000-60,000
Wisconsin 4-7.65% 4 $11,090-244,270
