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State income tax in the USA
16th Nov 2022
A state income tax in the USA is a tax on income earned in a given state. It is similar to a federal income tax, but state income tax generally funds state budgets rather than the federal government.
How state income tax rates work
In general, states choose one of three approaches to taxing residents and/or workers:
- No tax income at all.
- Flat tax. That means they tax all income, or dividends and interest only in some cases, at the same rate.
- Progressive tax. That means people with higher taxable incomes pay higher state income tax rates.
If, like most people, you live and work in the same state, you probably need to file only one state tax return each year. But if you moved to another state during the year, lived in one state but worked in another or have, say, income-producing rental properties in multiple states, you might need to file more than one tax return. And since the price of most tax software packages includes preparation and filing for only one state, filing multiple state income tax returns often means paying extra.
States with no income tax
Eight US states don’t have an income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. New Hampshire has a 5% tax on dividends and interest only.
The idea of not having to pay state income taxes could give you the urge to throw everything in and head to Dallas, but property taxes, sales taxes or other taxes and fees might be higher in those states.
States with flat income tax rates
Ten US states try to keep things simple by applying the same tax rate to most income. Supporters of a flat tax system argue that it encourages wealth accumulation because top earners aren't punished with higher tax rates. Since everyone pays the same rate, the system is far simpler than the progressive tax system in place in most states.
Opponents of the flat tax system argue that it places an unfair burden on low-income earners - the people with the lowest income pay the same tax rate as the people with the highest income in the state.
| State | Rate |
|---|---|
| Colorado | 4.55 % |
| Illinois | 4.95 % |
| Indiana | 3.23 % |
| Kentucky | 5 % |
| Massachusetts | 5 % |
| Michigan | 4.25 % |
| New Hampshire* | 5 % |
| North Carolina | 4.99 % |
| Pennsylvania | 3.07 % |
| Utah | 4.95 % |
*On dividends and interest income only
States with progressive tax structures
Most states and the District of Columbia tax income in the similar way the federal government does: They tax higher levels of income at higher state income tax rates.
State income tax rates tend to be lower than federal tax rates. Many range between 1% and 10%. Some states tax as little as 0% on the first few thousand dollars of income.
High-tax states top out around 13%, and that’s often on top of property taxes, sales taxes, utility taxes, fuel taxes and whatever the taxpayer must send to the federal government.
The table below shows the number of tax brackets in states (plus D.C.) with progressive tax structures. Note that the dollar amounts in the income brackets apply to single filers; in many states, the income brackets double for joint returns. As is the case for federal returns, the amount you’ll pay to your state is also a function of your marital status, whether you have dependents and whether you qualify for tax deductions and credits.
2022 state tax rates
For taxes filed in 2023.
| State | Tax rates | # of brackets | Lowest and highest tax bracket (income) |
|---|---|---|---|
| Alabama | 2 % - 5 % | 3 | $ 500 - $ 3,001 |
| Arizona | 2.59 % - 4.5 % | 4 | $ 27,808 - $ 166,843 |
| Arkansas | 2.0 % - 5.5 % | 3 | $ 4,300 - $ 8,501 |
| California | 1 % - 12.3 % | 9 | $ 9,325 - $ 625,369 |
| Connecticut | 3 % - 6.99 % | 7 | $ 10,000 - $ 500,000 |
| Delaware | 0 % - 6.6 % | 7 | $ 2,000 - $ 60,001 |
| District of Columbia | 4 % - 9.75 % | 6 | $ 10,000 - $ 1,000,000 |
| Georgia | 1 % - 5.75 % | 6 | $ 750 - $ 7,001 |
| Hawai | 1.4 % - 11 % | 12 | $ 2,400 - $ 200,000 |
| Idaho | 1.125 % - 6.5 % | 5 | $ 1,568 - $ 7,939 |
| Iowa | 0.33 % - 8.53 % | 9 | $ 1,743 - $ 78,435 |
| Kansas | 3.1 % - 5.7 % | 3 | $ 15,000 - $ 30,000 |
| Louisiana | 1.85 % - 4.25 % | 3 | $ 12,500 - $ 50,001 |
| Maine | 5.8 % - 7.15 % | 3 | $ 23,000 - $ 54,450 |
| Maryland | 2 % - 5.75 % | 8 | $ 1,000 - $ 250,000 |
| Minnesota | 5.35 % - 9.85 % | 4 | $ 28,080 - $ 171,221 |
| Mississippi | 0 % - 5 % | 3 | $ 5,000 - $ 10,001 |
| Missouri | 1.5 % - 5.3 % | 9 | $ 1,121 - $ 8,968 |
| Montana | 1 % - 6.75 % | 7 | $ 2,900 - $ 17,400 |
| Nebraska | 2.46 % - 6.84 % | 4 | $ 3,340 - $ 32,210 |
| New Jersey | 1.4 % - 10.75 % | 7 | $ 20,000 - $ 1,000,000 |
| New Mexico | 1.7 % - 5.9 % | 5 | $ 5,500 - $ 210,000 |
| New York | 4 % - 10.9 % | 9 | $ 8,500 - $ 23,000,000 |
| North Dakota | 1.1 % - 2.9 % | 5 | $ 41,775 - $ 458,350 |
| Ohio | 0 % - 3.99 % | 6 | $ 25,000 - $ 110,650 |
| Oklahoma | 0.25 % - 4.75 % | 6 | $ 1,000 - $ 7,200 |
| Oregon | 4.75 % - 9.9 % | 4 | $ 3,750 - $ 125,000 |
| Rhode Island | 3.75 % - 5.99 % | 3 | $ 68,200 - $ 155,050 |
| South Carolina | 0 % - 7 % | 6 | $ 3,110 - $ 15,560 |
| Vermont | 3.35 % - 8.75 % | 4 | $ 42,150 - $ 213,150 |
| Virginia | 2 % - 5.75 % | 4 | $ 3,000 - $ 17,001 |
| West Virginia | 3 % - 6.5 % | 5 | $ 10,000 - $ 60,000 |
| Wisconsin | 3.54 % - 7.65 % | 4 | $ 12,760 - $ 280,950 |
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