State income tax rates range from 0% to over 13%, depending on where you live and how much you earn

Nine states have no state income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not wages). The remaining 41 states and the District of Columbia all tax income, but the rate you pay depends on three things: which state you live in, how much you earn, and what kind of income it is.

Most states use a progressive tax system, meaning the rate increases as your income rises. A few states use a flat rate — everyone pays the same percentage regardless of income. The highest state income tax rates in the country are in California (up to 13.3%), Hawaii (up to 11%), and Vermont (up to 8.75%), but these explore only to the highest earners in those states. Someone earning $40,000 in California pays a much lower rate than someone earning $400,000.

State income tax is separate from federal income tax. You pay both. The federal government takes its share first, then your state takes its share from what's left. If you live in a state with no income tax, you still file federal taxes — you just skip the state return.

Key Takeaways

  • Nine states collect no income tax on wages, though some tax other income like investment gains.
  • The remaining 41 states and D.C. tax income at rates ranging from 1% to over 13%, usually with higher rates for higher earners.
  • Your state tax rate depends on your income level, filing status, and what state you live in — not on your federal tax bracket.
  • State income tax is withheld from your paycheck separately from federal withholding, and you report it on a separate state return.

How progressive tax brackets work in states that use them

Most states divide income into brackets, just like the federal system does. You don't pay one rate on all your income — you pay different rates on different portions. For example, in a state with brackets of 2%, 4%, and 6%, you might pay 2% on the first $30,000, then 4% on income from $30,001 to $70,000, then 6% on anything above that.

The exact brackets and rates vary by state and change most years. A state might adjust them for inflation or change them through new legislation. This means your effective tax rate — the actual percentage you pay on your total income — is lower than the top bracket rate you fall into. If you earn $50,000 in a state with the brackets described above, you don't pay 4% on all of it; you pay 2% on the first $30,000 and 4% on the remaining $20,000, for an effective rate of about 2.67%.

Some states also offer tax credits or deductions that lower your taxable income before the brackets are applied. These vary widely — some states credit property taxes, others credit child care expenses, and some offer credits for low-income earners.

Flat-tax states charge the same rate to everyone

A handful of states use a flat income tax: Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire (on investment income only), North Carolina, Pennsylvania, and Utah. In these states, everyone pays the same percentage of income tax, regardless of how much they earn.

A flat tax might seem simpler, but it's not necessarily lower. Illinois, for instance, has a flat rate of 4.95%, which is higher than the top rate in many progressive-tax states for middle-income earners. Pennsylvania's flat rate is 3.07%. The advantage of a flat system is predictability — you know exactly what percentage you'll owe — but it means higher earners pay the same rate as lower earners, which is why some people view it as less progressive.

How your filing status and deductions affect what you owe

Your state tax bill also depends on your filing status (single, married filing jointly, head of household) and whether you take the standard deduction or itemize. Most states follow the federal definition of taxable income as a starting point, then make adjustments. Some states allow you to deduct federal income taxes paid, others don't. Some allow deductions for retirement contributions or student loan interest.

A few states tax capital gains at a different rate than ordinary income. California, for example, taxes long-term capital gains as ordinary income (up to 13.3%), while some other states have lower rates or exemptions for investment gains. This matters if you sell stock, real estate, or other assets during the year.

States also vary on what counts as income. Most tax wages, salaries, and self-employment income. Some tax retirement income differently — a few states don't tax Social Security or pension income at all, which can make a big difference for retirees.

Where to find your state's specific rates and brackets

Your state's Department of Revenue or Department of Taxation publishes the current tax rates and brackets every year. These are usually available on their website, along with the tax forms you'll need to file. The IRS also maintains a list of state tax agencies with links to each one.

If you're moving to a new state or starting a job in a different state, check that state's website before you move. The difference between a 0% income tax state and a 10% state can be substantial on your take-home pay. Some states also have local income taxes on top of the state rate — cities in Ohio, Pennsylvania, and a few other states can impose their own income tax, so your total state and local rate might be higher than the state rate alone.

How state income tax withholding works on your paycheck

When you start a job, you fill out a state withholding form (usually called a W-4 or a state-specific equivalent) that tells your employer how much state income tax to take from each paycheck. Your employer sends that money to the state on your behalf throughout the year. At tax time, you file a state return to reconcile what was withheld against what you actually owe.

If too much was withheld, you get a refund. If too little was withheld, you owe the difference. The withholding is based on the information you provide — your filing status, number of dependents, and any additional income or deductions. If your situation changes during the year (you get married, have a child, or take a second job), you can update your withholding form to adjust future paychecks.

Self-employed people don't have an employer to withhold for them, so they usually make quarterly estimated tax payments to their state, just as they do to the federal government. The amount and due dates vary by state.

Special situations: remote work, military, and retirement income

If you work remotely for a company in another state, you typically owe income tax to the state where you live, not where your employer is located. However, some states have different rules, and a few states tax nonresidents who work for in-state employers. If you're in this situation, check both your home state's rules and your employer's state's rules.

Military members stationed in a state are usually taxed by their home state, not the state where they're stationed, under the Servicemembers Civil Relief Act. This is one of the few situations where federal law overrides state tax rules.

Retirees should know that state tax treatment of retirement income varies dramatically. Some states don't tax Social Security, pensions, or retirement account withdrawals at all. Others tax everything. If you're planning to retire, the state you choose can have a significant impact on your retirement income.

Frequently Asked Questions

Do I pay state income tax if I live in one state but work in another?

You generally owe tax to the state where you live. If you work in a different state, that state might also try to tax you, but most states have reciprocal agreements or credits to prevent double taxation. Check both states' rules, or ask your employer's payroll department — they often handle this.

Can I deduct federal income tax from my state taxable income?

It depends on your state. Some states allow you to deduct federal income taxes paid; others don't. A few allow a partial deduction. Check your state's tax form instructions or website to see what deductions your state allows.

Are capital gains taxed differently than regular income at the state level?

Most states tax capital gains as ordinary income at the same rate. A few states have lower rates for long-term capital gains, and a couple exempt them entirely. Check your state's rules if you sold investments during the year.

What happens if I move to a different state mid-year?

You'll file a part-year resident return in both states, reporting only the income earned while you lived there. Each state taxes only the income you earned within its borders during the time you were a resident. You'll need to update your withholding in your new state.

Do I have to file a state return if I didn't earn much income?

Most states have a minimum income threshold — if your income is below it, you don't have to file. The threshold varies by state and filing status. Check your state's website or tax form instructions to see whether you're required to file.