Income Tax by State – How Does Your State Compare?

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Last Updated:Jan 13, 2024

Income Tax by State – How Does Your State Compare?

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Federal income tax rates garner much of the attention in the news, but your state income tax can also pack a big punch to your wallet. How much you feel this impact depends on your state, where you work, and the amount of revenue you earn.

As much as I loathe the thought of paying taxes like the next person, by gaining a greater understanding of how the various state income tax levels work can help us all make strategic financial decisions. Decisions such as if moving to another state is beneficial for your finances or if it’s wise to invest in rental property across state lines. Or, it could be simply to help you file your next tax return. Let’s take a closer look at income state tax levels and then break it down by state.

Related: The Cheapest Places to Live

In this article

How does state income tax work?

When it comes to taxes, the state income tax works fall into one of three categories:

No state income tax.
Flat tax. A flat tax is where all income, including dividends and interest in most cases, is taxed at the same rate.
Progressive tax. This is where the tax amount increases as the taxpayer's income increases.

It’s important to understand how the tax works for your state and where you work if you work in a different state than your primary address. It’s also essential to understand the state income taxes if you own rental property in another state.

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States with no income tax

There are currently nine states that do not have a personal income tax or tax on capital gains:

Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming

This may sound like a dream come true (and perhaps some benefits), but these states tend to have higher property or sales taxes. So before you move across the country to one of these states, you may want to consider the entire tax picture. State taxes can be added on at both the state and local levels.

States with flat income tax rates

There are currently 14 states with a flat income tax rate structure. Some of these states assess the tax on taxable income, while others tax adjustable gross income. Adjustable gross income, or AGI, is your total income minus your tax deductions.

State	2024 Flat Tax Rate
Arizona	2.5%
Colorado	3.5%
Idaho	5.8%
Illinois	4.95%
Indiana	3.23%
Kentucky	4%
Massachusetts	5%
Michigan	4.25%
Mississippi	5.0%
New Hampshire	4% on dividends and interest income only
North Carolina	4.5%
Pennsylvania	3.07%
Utah	4.85%
Washington	7.0% on capital gains income only

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States with a progressive tax structure

The remaining 30 states and the District of Columbia follow a progressive tax structure. This means the higher your income, the more taxes you pay. This is the same tax structure as the federal income tax. The amount you pay in individual income tax in these states also depends on your marital status, the number of dependents you have, your tax deductions, and your tax credits, similar to federal income taxes.

Most states with this structure also offer personal exemptions and standard deductions. Personal exemptions refer to the amount you can deduct from your total personal income, which means you can lower your taxable income.

Standard deductions refer to the dollar amount all tax filers can claim unless you itemize deductions (an expense that can be subtracted from your earned income, thus lowering your taxable income). This amount varies by state and if you are a single filer or married filer. For example, the standard deduction in Arizona is $13,850 for single filers and $27,700 for married.

State tax rates

Here is a breakdown of the state income tax structure you will find in each state for the 2024 tax year.

State	Tax Rate	Number of Tax Brackets
Alabama	2%-5%	3
Alaska	No state income tax	None
Arizona	2.50%	1
Arkansas	2.0%-4.70%	5
California	1%-12.30%	9
Colorado	4.40%	1
Connecticut	3%-6.99%	7
Delaware	2.20%-6.60%	7
District of Columbia	4%-10.75%	7
Florida	No state income tax	0
Georgia	1%-5.75%	6
Hawaii	1.40%-11%	12
Idaho	5.8%	1
Illinois	4.95%	1
Indiana	3.15%	1
Iowa	4.40%-5.70%	4
Kansas	3.10%-5.70%	3
Kentucky	4.5%	1
Louisiana	1.85%-4.25%	3
Maine	5.80%-7.15%	3
Maryland	2%-5.75%	8
Massachusetts	5%-9%	2
Minnesota	5.35%-9.85%	4
Mississippi	5%	1
Missouri	2%-4.9%	7
Montana	1%-6.75%	7
Nebraska	2.46%-6.84%	4
Nevada	No state income tax	0
New Hampshire	3% on dividends and Interest Income only	1
New Jersey	1.4%-10.75%	7
New Mexico	1.7%-5.9%	5
New York	4%-10.9%	9
North Carolina	4.75%	1
North Dakota	1.10%-2.90%	5
Ohio	2.765%-3.99%	4
Oklahoma	0.25%-4.75%	6
Oregon	4.75%-9.90%	4
Pennsylvania	3.07%	1
Rhode Island	3.75%-5.99%	3
South Carolina	0.0%-6.50%	3
South Dakota	No state income tax	None
Tennessee	No state income tax	None
Texas	No state income tax	None
Utah	4.85%	1
Vermont	3.35%-8.75%	4
Virginia	2.0%-5.75%	4
Washington	7.0% on capital gains income only	None
West Virginia	3.0%-6.5%	5
Wisconsin	3.54%-7.65%	4
Wyoming	No state income tax	None

Source: Federation of Tax Administrators

Top 10 highest income tax rates by state

What state has to pay the most in individual income tax? Using the chart above, the states with the highest income tax rates are:

State	Income Tax Rate
California	12.3%
Hawaii	11%
New York	10.9%
New Jersey	10.75%
Oregon	9.9%
Minnesota	9.85%
District of Columbia	10.75%
Vermont	8.75%
Wisconsin	7.65%
Maine	7.15%

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FAQs

What does my state income tax pay for?

Each state operates its own Department of Revenue, responsible for enforcing the tax laws and making sure you pay the taxes you are owed to the state. Each state also sets up a budget, which varies depending on the state but is similar to the federal budget set up. The revenue raised by the state is typically used for programs such as education, health care, transportation, corrections, and low-income assistance. Revenue for state police, pension and health benefits for state employees, environmental programs, and parks and recreation are other types of state-level spending.

How do you pay income tax if you work in another state?

You should expect to pay state income taxes based on your state, but if you work in another state, you may not have to file taxes for the state where you work. This varies from state to state, so the best course of action is to consult a tax professional to find out if the state you work in has a reciprocal agreement with the state you live in.

How do states with no income tax make money?

While the sound of no state income tax may sound enticing, these states earn revenue in other ways. As a result, you will likely see these states have higher property taxes, sales taxes, or fuel taxes. This is important to note because it could make a difference in how much overall tax you are responsible for paying.

The bottom line

Where you live does make a difference to your wallet. Every state has its tax structure; some states make you pay more taxes than others. Naturally, the tax laws become more complicated the further you dig in, which is why it’s always a smart idea to enlist the help of a tax professional when you have questions about your state taxes.

Your personal plans, such as moving or establishing a business in another state, may or may not hinge on the state income tax rate. Or, the taxes could be high enough actually to sway your decisions. But at least having the tax information available to you and taking the time to review the rates will allow you to make a more informed decision.

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Sara Coleman is a former corporate gal turned creative entrepreneur. She began writing professionally several years ago and now contributes to multiple websites, blogs, and magazines. She’s also an avid reader and can’t resist a great historical fiction novel. Sara holds a BA in journalism from the University of Georgia and can be found supporting her Bulldogs every chance she has. She resides in Charlotte, North Carolina, with her wonderfully supportive husband and three children. When she’s not ushering her kids to sports and dance lessons, she can be found creating content for her own website, TheProperPen.com.

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