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Income tax by state

3 min read

3 min read

Did you know… not every state taxes the same?

Yes, that’s right. Unlike the federal tax rates, income tax by state varies. So, not every state has the same tax rate – and some are income tax-free. Tax on personal income varies from state to state and can range from 0 to 13.3%.

The states with the highest taxes are California, Hawaii, Oregon, Minnesota, Iowa, New Jersey, New York, and Vermont where residents pay 8% or higher on state income tax. Meanwhile, residents of Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not pay any state individual income tax. Makes you think twice about where you live, right?!

In addition to the highest or lowest state tax rates below, you can view more information about other states tax rates and taxes.

Learn more about the highest taxed states as well as the states with lowest taxes.

Highest taxed states

tax ratesWhen it comes to income tax, state tax rates vary. Some are on the higher side. In fact, the states with the highest tax in the U.S. in 2021 are:

  • California (13.3%)
  • Hawaii (11%)
  • New Jersey (10.75%)
  • Oregon (9.9%)
  • Minnesota (9.85%)
  • District of Columbia (8.95%)
  • New York (8.82%)
  • Vermont (8.75%)
  • Iowa (8.53%)
  • Wisconsin (7.65%)

(Please note, these states have progressive tax rates, so the rates indicated above are the highest tax rate by state.)

Keep in mind, the states with the highest tax can vary year over year, so check back each year with your state treasury/tax department.

States with the lowest taxes

For taxpayers in most U.S. states, you file federal and state income taxes. However, that’s not the case for every state. If you’re a taxpayer in one of the seven states without an individual income tax, you don’t have to file a state income tax return. Here are the states with the lowest taxes (tax-free).

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

Additionally, New Hampshire and Tennessee don’t have income taxes, but they tax dividend and interest income. (This will phase out. Both states will be income tax free by 2025.)

Remember, if you live and work in a state without individual income taxes, you don’t pay taxes on your income from Social Security, pensions, or retirement plans. However, you are still subject to other taxes, including local, property taxes, and sales taxes.

Other state tax information

If you’ve recently filed your taxes and are curious about the status of your state tax refund information, we can help!

General procedure for filing state and federal income taxes

When you file your federal taxes, you will likely fill out additional state tax forms that go to your given state’s revenue agency. Both federal and state taxes are drawn from your paycheck if you’re a traditional, W-2 employee. As you file your taxes, you may either owe money or get a refund, depending on the amount you withheld throughout the year.

More help with state tax rates

If you move to a different state within a tax year, or work in one state and live in another, state taxes can get a little more complex. Learn more about state sales tax rates here.

If you need help understanding state tax rates – or filing state and federal income tax returns, H&R Block can help. We can assist in a number of ways. If you want to tackle taxes yourself, use our state tax filing software. Or, you can choose online tax preparation with tax pros with state-specific tax expertise.

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