State income tax is imposed by the legislative party of each state to fund the public programs and services. While federal tax rates remain unchanged across the entire US, state income tax varies from state to state. Some states even have 0% income tax.
In this blog, we will explore the varying state income tax rates, including those of states with the highest and lowest rates.
Key Takeaways
Many states in the USA impose an income tax on earnings, similar to the federal government.
42 states in the USA impose income tax, whereas Washington, D.C., imposes a local tax.
State tax rates, procedures, forms, and rules vary from state to state.
Ten states in the USA have flat tax rates, which means the same rate is applied to every income level.
Eight states in the USA do not impose any income tax at all. However, the residents of such states are required to pay other taxes.
What is the State Income Tax?
As its name suggests, the state income tax meaning a charge imposed by a state on the income of individuals living there. State taxes are collected to provide state programs and pay the state's bills.
Furthermore, the state income tax helps support state welfare programs, including transportation facilities, education, library safety, low-income assistance, subsidized healthcare programs, and more.
However, this ensures that tax laws, procedures, forms, and tax rates vary widely from state to state. The due date of filing might also vary for many, but for the state tax day, it is usually the same as the federal tax day, which is generally April 15th
Flat Tax Rate States
In the United States, 10 taxes impose a flat tax rate on income. A flat tax rate means that, regardless of the income level, everyone is subject to the same income tax rate.
The states that are imposing flat tax rates are
Colorado
Illinois
Indiana
Kentucky
Massachusetts
Michigan
New Hampshire
North Carolina
Pennsylvania
Utah
States With Zero Personal Income Tax
Some states have decided not to tax the personal income of individuals. This gives residents the advantage of keeping more of their hard-earned income. Such states without an income tax are:
Alaska
Florida
Neveda
South Dakota
Tennessee
Texas
Wyoming
The lack of state income tax does not mean that the citizens of these states are not obligated to pay any taxes. In contrast, individuals living in such states are required to pay various other taxes, including sales tax, a cigarette tax, property tax, and gasoline tax.
In 2024, New Hampshire did not earn any income tax revenue; however, it imposed taxes on dividends and interest income of individuals. As of the start of 2025, the state legislature decided not to tax dividends and interest income.
Similarly, Washington is also known for not taxing its residents on personal income for many years. However, it is currently imposing a tax rate on long-term capital gains.
Look Beyond The Income Tax Rates
Yes, the absence of state income tax might seem lucrative for afar, but it is also essential to consider the overall tax burden of the state as well. Perhaps the state has high sales or property taxes to offset the shortfall in income tax revenue. Moreover, every state has its own different cost of public services and living, which may offset the tax savings an individual makes by paying zero income tax.
If you live in a state with either no income tax or a low income tax rate, it can be a significant financial advantage. However, it is essential to consider the broader picture when deciding where to live to save the most money. Please ensure that you evaluate all significant tax implications, cost of living, and other state-specific taxes and fees.
Graduated Income Tax Rates
The District of Columbia and the majority of the remaining 36 states have a similar income tax structure to that of he federal government income tax structure.
This means that the income of individuals will be taxed under different brackets at various tax rates, which increase as the annual income increases. In simpler terms, the higher an individual's annual income, the more tax they have to pay.
However, the regulatory framework and state income tax laws are simpler than the federal tax code, as they have fewer tax brackets.
Top 10 States With Highest Income Tax Rates (2025)
Below, we have compiled a list of states with the highest state income tax. The list features approximate tax rates
California - 13.3%
Hawai - 11.0%
New York - 10.9%
District of Columbia, DC - 10.75%
New Jersey - 10.75%
Oregon - 9.9%
Minnesota - 9.85%
Vermont - 8.75%
Wisconsin - 7.65%
Maine - 7.15%
Please note that these tax rates represent the maximum that an individual might have to pay based on their earnings bracket. However, the effective rate could be lower after accounting for various deductions and tax credits.
Do I Have To File A State Tax Return?
Generally, not everyone in the United States is obligated to file state income taxes. As an individual in the US, you need to file the state income tax only when you live or earn income in a state that has an income tax rate imposed and when you meet the eligibility criteria.
Below are Some Situations Where Tax Filing is a Must:
Federal Tax Return Filing: If you are filing a federal income tax return, most states will require you to file state income taxes. Please note that the IRS permits taxpayers to claim a tax deduction of up to $10,000 for state income tax while filing their federal tax return, provided the individual has itemized their tax deductions on the federal return.
Income Over Set Threshold: There are some states in the US where you will need to file an income tax return only if your income is above a certain set threshold. The threshold amount varies from state to state.
Claiming Tax Credit: As a taxpayer, if you are eligible to claim a certain refundable credit on your state income tax return, you may receive money back from the state legislature. Likewise, to receive a refund, the individual must first file the state taxes to claim the tax credit.
Do I Have To File State Income Tax If I Don't Live There
When an individual lives in one state for the entire financial year, there is no doubt about their residency status. However, in cases where an individual has moved to a new state during a fiscal year or if the individual was not a resident at all and was only there to earn wages or income, will they be required to file state income taxes? Let us clear all this up.
Below are some common scenarios in which you might have to file state income tax, possibly in more than one state.
Moving From One State to Another: In a case when an individual has moved from one state to another in the fiscal year, then they might have to file taxes in both states. Some states have filing regulations that require you to file taxes, depending on the minimum number of days or months you spend in a state.
For some states, moving there with the intent to reside permanently may be enough for you to file taxes.
Working in one state and living in another state: Working in one state and living in another might make you liable to file state returns for both of them, but it does not mean that you will be taxed twice on the same income source.
There are cases in which, as a taxpayer, you might be able to take a state income tax reciprocity advantage, which can exempt income earned by non-residents of the neighboring states. And then for other cases, you could receive a tax credit for the tax you have paid in another state.
State-Based Income: If you earn revenue from a state, it can mean that you are required to file taxes in that state, even if you don't live or physically work there. Such income examples could be rental income, a real estate investment trust, or a partnership located in a state.
If you win a lottery prize or money from gambling or any proceeds from selling a property in a state where you are not a resident, then such instances could also trigger filing a state return.
Get Expert Help In Filing Your Income Tax Return
Taxes are tricky, and when you have to figure out state income tax filing for multiple states, it can get even trickier. And that is where you might require a US business tax and compliance expert.
Savetaxs, a leading name in the taxation industry, has helped file taxes for thousands of US Citizens and NRIs worldwide. Our impeccable services are not limited to tax filing in the United States; we also assist you in setting up your business in the USA. After all, establishing a business in the US is not a cakewalk.
Savetaxs experts help you with all the necessary legal documents, licenses, tax identification numbers, and more to kick-start your business. Additionally, our services also extend to helping you file your US income tax returns, as well as federal taxes, while ensuring everything complies with the regulations set by the Internal Revenue Code (IRS).
Savetaxs serves its customers 24/7 across all time zones; hence, connect with us right away!
Note: This guide is for informational purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult with either a Chartered Accountant (CA) or a professional Company Secretary (CS) from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.
No matter what your source of income is, we've got you covered. There’s a plan for everybody!
State income tax is a kind of charge imposed on your income by the state legislature. Such taxes are imposed to fund the local services and public programs. Every state has its own tax rate and procedure. However, some states in the USA do not impose any state income taxes at all.
No, not all the states in the USA impose any income tax. Eight states do not impose any income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Yes, there are ten states in the USA with flat tax rates: such states are Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, New Hampshire, North Carolina, Pennsylvania, and Utah.
The majority of states impose the progressive income tax structure. In this type of tax structure, the income is taxed in multiple brackets. Similar to the federal tax system, the progressive state tax system features fewer brackets with low tax rates.
The calculation of the state taxable income starts with your federal adjusted gross income (AGI), then the state-specific tax deduction is applied along with he tax adjustments and exemptions. In states with a flat tax system, the process is even more specified.
Yes, in the case where you itemize your tax deductions, you can deduct your local and state income taxes, as well as sales or property taxes. And even the SALT deduction has been increased to $40,000 for the year 2025.
States that do not impose income taxes often make their revenue through higher property, sales, or excise taxes to offset the gap of no income tax revenue. In a nutshell, residents living in states with no income tax still end up paying significant taxes, just in a different form.
The tax rates for federal taxes are the same nationwide and have multiple tax rate brackets, ranging from 10% to 37%.
State taxes vary from state to state; some states use a flat tax system, while others employ a progressive income tax system, among other approaches.
Yes, even non-residents are required to pay taxes on the income they earn in the state, such as business income or wages.
Yes, considering state income tax when moving or job hunting can significantly affect your cost of living. Ensure to compare all taxes for the respective states, which include sales tax, property tax, and other applicable taxes.
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