What Is State Income Tax - Overview, How It Works And More

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.

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.