State Income Tax Rates in 2021: What They Are and How They Work

State income tax typically works one of three ways: A progressive tax, a flat tax or none at all.

Tina OremApr 12, 2021
State Income Tax Rates: What They Are and How They Work
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State income tax rates receive relatively little attention compared with federal income taxes, but they can still put a large dent in your wallet. How large depends on the amount you earn, as well as where you live and work. Here's how it works, and a list of states with no income tax.

What is a state income tax?

A state income tax is a tax on income earned in that state. It is similar to a federal income tax, but state income tax generally funds state budgets rather than the federal government.

How state income tax rates work

In general, states take one of three approaches to taxing residents and/or workers:

  1. No tax income at all.

  2. Flat tax. That means they tax all income, or dividends and interest only in some cases, at the same rate.

  3. Progressive tax. That means people with higher taxable incomes pay higher state income tax rates.

If, like most people, you live and work in the same state, you probably need to file only one state return each year. But if you moved to another state during the year, lived in one state but worked in another or have, say, income-producing rental properties in multiple states, you might need to file more than one. And because the price of most tax software packages includes preparation and filing for only one state. Filing multiple state income tax returns often means paying extra.

» MORE: Try our free tax calculator

States with no income tax

Eight states don’t have an income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming. New Hampshire has a 5% tax on dividends and interest only.

The idea of not having to pay state income taxes could give you the urge to throw everything in a U-Haul and head for Dallas, but property taxes, sales taxes or other taxes and fees might be higher in those states.

States with flat income tax rates

Ten states try to keep things simple by applying the same tax rate to most income. Of course, what counts as “income” depends on the state. In New Hampshire, for example, regular income is generally not subject to state tax, but a flat tax rate applies to dividends and interest income. And some states apply their tax rates to taxable income, while others use adjusted gross income.

State

Rate

Colorado

4.55%

Illinois

4.95%

Indiana

3.23%

Kentucky

5%

Massachusetts

5.0%

Michigan

4.25%

New Hampshire*

5%

North Carolina

5.25%

Pennsylvania

3.07%

Utah

4.95%

* On dividends and interest income only

States with progressive tax structures

Most states and the District of Columbia tax income much the way the federal government does: They tax higher levels of income at higher state income tax rates.

State income tax rates tend to be lower than federal tax rates. Many range between 1% and 10%. Some states tax as little as 0% on the first few thousand dollars of income.

High-tax states top out around 13%-14%, and that’s often on top of property taxes, sales taxes, utility taxes, fuel taxes and whatever the taxpayer must send to the federal government.

The table below shows the number of tax brackets in states (plus D.C.) with progressive tax structures. Note that the dollar amounts in the income brackets apply to single filers; in many states, the income brackets double for joint returns. As is the case for federal returns, the amount you’ll pay to your state is also a function of your marital status, whether you have dependents and whether you qualify for tax deductions and credits.

2021 state tax rates

State

Tax rates

# of brackets

Lowest and Highest Tax Bracket Starting Points (Income)

Alabama

2%-5%

3

$500-$3,001

Arizona

2.59%-8%

4

$27,272-$163,633

Arkansas

2.0%-5.9%

3

$4,000-$79,300

California

1%-13.3%

9

$8,932-$599,012

Connecticut

3%-6.99%

7

$10,000-$500,000

Delaware

0%-6.6%

7

$2,000-$60,001

District of Columbia

4%-8.95%

6

$10,000-$1,000,000

Georgia

1%-5.75%

6

$750-$7,001

Hawaii

1.4%-11%

12

$2,400-$200,000

Idaho

1.125%-6.925%

7

$1,568-$11,760

Iowa

0.33%-8.53%

9

$1,676-$75,420

Kansas

3.1%-5.7%

3

$15,000-$30,000

Louisiana

2%-6%

3

$12,500-$50,001

Maine

5.8%-7.15%

3

$22,450-$53,150

Maryland

2%-5.75%

8

$1,000-$250,000

Minnesota

5.35%-9.85%

4

$27,230-$166,041

Mississippi

3%-5%

3

$5,000-$10,001

Missouri

1.5%-5.4%

9

$1,088-$8,704

Montana

1%-6.9%

7

$3,100-$18,800

Nebraska

2.46%-6.84%

4

$3,340-$32,210

New Jersey

1.4%-10.75%

7

$20,000-$1,000,000

New Mexico

1.7%-5.9%

4

$5,500-$210,000

New York

4%-8.82%

8

$8,500-$1,077,550

North Dakota

1.1%-2.9%

5

$40,525-$445,000

Ohio

0%-4.797%

6

$22,150-$221,300

Oklahoma

0.5%-5%

6

$1,000-$7,200

Oregon

4.75%-9.9%

4

$3,650-$125,000

Rhode Island

3.75%-5.99%

3

$66,200-$150,550

South Carolina

0%-7%

6

$3,110-$15,560

Vermont

3.35%-8.75%

4

$40,350-$204,000

Virginia

2%-5.75%

4

$3,000-$17,001

West Virginia

3%-6.5%

5

$10,000-$60,000

Wisconsin

3.44%-7.65%

4

$12,120-$266,930

Source: Federation of Tax Administrators

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.

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