State Income Taxes: A Comprehensive Guide
In addition to federal income taxes, most U.S. residents must also pay state income taxes. Each of the 50 states has its own tax rules — rates, deductions, and credits that differ significantly from federal rules and from one another.
States with No Income Tax
Nine states currently impose no individual income tax on wages:
Note: New Hampshire and Tennessee tax interest and dividends but not wages. Washington has a capital gains tax on high earners but no general income tax. "No income tax" states often make up revenue through higher property taxes, sales taxes, or other fees.
States with Flat Income Tax Rates
Some states apply a single flat rate to all income:
| State | Flat Rate |
|---|---|
| Arizona | 2.5% |
| Colorado | 4.4% |
| Georgia | 5.49% |
| Idaho | 5.8% |
| Illinois | 4.95% |
| Indiana | 3.05% |
| Kentucky | 4.0% |
| Massachusetts | 5.0% |
| Michigan | 4.25% |
| North Carolina | 4.5% |
| Pennsylvania | 3.07% |
| Utah | 4.55% |
States with Progressive Tax Rates
Most states with income taxes use a progressive bracket system similar to the federal system. Top rates vary widely:
| State | Top Marginal Rate | Number of Brackets |
|---|---|---|
| California | 13.3% | 10 |
| Hawaii | 11.0% | 12 |
| New York | 10.9% | 9 |
| New Jersey | 10.75% | 7 |
| Oregon | 9.9% | 4 |
| Minnesota | 9.85% | 4 |
| Vermont | 8.75% | 5 |
| Wisconsin | 7.65% | 4 |
Always verify current rates with your state's department of revenue, as rates change regularly.
How State Income Taxes Work
- State tax returns are filed separately from federal returns, usually by the same April 15 deadline
- Most states start with federal AGI and then apply their own adjustments, deductions, and credits
- Many states have their own standard deduction and personal exemption amounts
- State tax withheld from your paycheck appears in Box 17 of your W-2
- State refunds are taxable federal income in the following year (if you itemized the SALT deduction)
Filing Taxes in Multiple States
You may need to file in more than one state if you:
- Moved to a new state during the year (file a part-year resident return in each state)
- Worked in one state while living in another (file a nonresident return in the work state)
- Own rental property or a business in a different state
Most states have reciprocity agreements with neighboring states that can simplify filing for commuters. Check your specific state's rules.
State Taxes and the Federal SALT Deduction
If you itemize on your federal return, you can deduct state income taxes (or sales taxes) plus property taxes on Schedule A — subject to the SALT cap. See our Itemized Deductions guide for the current cap amount and recent legislative changes.