1828, tax triggers were established that set the state on a course to a 2.5 percent flat rate subject to reaching specified revenue targets. To learn more about how your state income tax rates work, visit the website of your state’s taxation and revenue department, or the Federation of Tax Administrators. Even though the highest marginal rate of 5.99% applies to an income of $160,000, it doesn’t apply to all $160,000 of it. Graduated tax rates are progressive, so in our example, everyone pays 3.75% on the first $66,200, 4.75% on the next $84,350 and 5.99% on all income over $150,550.

If you are struggling to afford your current tax liability, consider refinancing your property, as it can help lower the costs tied to owning a home. The local income tax is calculated as a percentage of your taxable income. Local officials set the rates, which range between 2.25% and 3.20% for the current tax year. You’ll notice that the brackets vary depending on whether you are single, married or a head of household. While it often makes sense to file jointly, filing separately may be the better choice in certain situations.

State and local income taxes

New Hampshire has the second-lowest income tax burden nationwide, with the average resident in 2020 paying 0.1% of their income, or $90, in state income taxes. The same year, North Dakota’s income tax revenue amounted to 0.8% of personal income, or $494 per capita. During the 2023 session the top rate was cut from 4.9% to 4.7% retroactive to January 1, 2023.

Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming don’t impose an income tax at all. New Hampshire falls into a gray area; it doesn’t levy a tax on earned income, but it does tax interest and dividends at a flat 5%. States with an income tax require employers to withhold state income tax on wages earned within the state. Some states have other withholding mechanisms, particularly with respect to partnerships. Most states require taxpayers to make quarterly estimated tax payments not expected to be satisfied by withholding tax.

Government 10-K

However, it still ranks a very respectable 22 out of 50 when compared with all states. The total state and local tax burden on Alaskans, including income, property, sales, and excise taxes, is just 5.10% of personal income, the lowest of all 50 states. Louisiana carries some of the lowest property tax rates as a percentage of earned income because it offers a homestead exemption. This law allows the first $7,500 of assessed property values to forego having property taxes levied against them.

There state has a 1% Mental Health Services surtax (Form 540, line 62) for incomes above $1 million that creates the maximum bracket of 13.3%. California also separately imposes a state Alternative Minimum Tax (Form 540, line 52) at a 7% rate, so a taxpayer may end up paying both the AMT and the 1% surtax. Most states provide for modification of both business and non-business deductions. All states taxing business income allow deduction for most business expenses.

Tax Credits

Keep in mind that most taxpayers don’t itemize their deductions. If the standard deduction is larger than the sum of your itemized deductions (as it is for many taxpayers), you’ll state income tax rates receive the standard deduction. The federal government gives tax credits for the cost of buying solar panels for your house and to offset the cost of adopting a child.

For example, the taxpayer must add back all state and local income taxes deducted in computing regular taxable income. The Tax Foundation interprets individual tax burden by what taxpayers actually spend in local and state taxes, rather than report these expenses from the state revenue perspective used by the Census Bureau. Its 2019 State and Local Tax Burden Rankings study reported that Americans paid an average rate of 9.9% in state and local taxes. 873, enacted in April 2022, Nebraska plans to reduce its top marginal individual income tax rate to 5.84 percent by 2027.

Review FAQs about filing requirements, residency, and telecommuting

Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Illinois, Mississippi, and Pennsylvania don’t tax distributions from 401(k) plans, individual retirement accounts (IRAs), and pensions. The remaining nine states that don’t levy a state tax at all are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Alabama and Hawaii also don’t tax pensions but they do tax distributions from 401(k) plans and IRAs.

• Note that Washington does levy a state capital gains tax on certain high earners.
• Always expect to file income taxes in the state where you live.
• The standard deduction is a minimum of $3,200 and capped at $4,850 for MFJ filers, head of household filers, and qualifying widows/ widowers.
• We offer a number of online services to fit your busy lifestyle.
• Let an expert do your taxes for you, start to finish with TurboTax Live Full Service.
• Check with the appropriate local services if you need help navigating the available programs.

Most states tax capital gain and dividend income in the same manner as other investment income. In this respect, individuals and corporations not resident in the state generally are not required to pay any income tax to that state with respect to such income. Gross income generally includes all income earned or received from whatever source with some exceptions. Many states provide tax exemption for certain other types of income, which varies widely by state. States uniformly allow reduction of gross income for cost of goods sold, though the computation of this amount may be subject to some modifications. We offer a number of online services to fit your busy lifestyle.

Low personal income tax rates can be misleading; a lack of available tax deductions, for example, can raise the effective rate you pay. The Retirement Living Information Center states that figuring your total tax burden, including sales and property taxes, can give you a more accurate reading on affordability, especially if you’re on a fixed income. However, these states with the lowest taxes on income can be a good place to start looking for a more affordable location. In the following tables, we have compiled the most up-to-date data available on state individual income tax rates, brackets, standard deductions, and personal exemptions for both single and joint filers. After the tables, we document notable individual income tax changes implemented in 2022.