State income tax rates are among the most important numbers in your financial life, yet they are also among the most misunderstood. The rate you see in a headline — say, 13.3% in California or 0% in Texas — is rarely the rate you actually pay on all your income. Most states use a graduated system, meaning different slices of your income are taxed at different rates. Others use a single flat rate. A handful do not tax wage income at all. Understanding how your state structures its tax, and which deductions and credits apply, can help you estimate your bill, compare job offers, and plan a move.
As of the 2025 tax year, 41 states tax wage income, according to the Tax Foundation. Washington taxes certain long-term capital gains above a threshold, and New Hampshire ended its tax on interest and dividends on January 1, 2025. The remaining nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not tax wages. The details vary enormously by state, so always check your state revenue department or a tax professional.
How State Income Tax Rates Work
States generally choose one of two structures for individual income tax: flat or graduated. A few states use a hybrid or have unusual rules.
- Flat tax: One rate applies to all taxable income above the state's exemption or deduction. Examples include Pennsylvania (3.07%), Indiana (3.0%), Kentucky (4.0%), Michigan (4.25%), North Carolina (4.25%), Colorado (4.4%), Utah (4.55%), and Illinois (4.95%). Massachusetts has a 5% flat rate plus a 4% surtax on income over $1 million.
- Graduated tax: Rates rise as income increases, so only the top slice of income is taxed at the highest rate. California has nine brackets, from 1% to 12.3%, plus a 1% mental health services tax on income over $1 million. Hawaii, New Jersey, New York, Oregon, and Minnesota also have top marginal rates above 9%.
- No wage tax: Nine states do not tax earned income. Washington applies a 7% excise tax on certain long-term capital gains above an annual standard deduction. New Hampshire's interest and dividends tax ended in 2025.
Your state taxable income is not simply your salary. Most states start with federal adjusted gross income or federal taxable income, then require state-specific additions and subtractions. For example, some states tax municipal bond interest from other states, while others exempt Social Security benefits or military pay. After arriving at state taxable income, you subtract state deductions and exemptions, apply the rate schedule, and then subtract credits such as a state earned income tax credit or child care credit.
Highest and Lowest State Income Tax Rates
The highest marginal state income tax rates are not paid by most residents. A top rate applies only to income above the final bracket threshold. Here is a snapshot of top marginal rates for the 2025 tax year:
| State | Top marginal rate | Notes | | --- | --- | --- | | California | 13.3% | 12.3% plus 1% mental health surtax over $1M | | Hawaii | 11% | Multiple brackets | | New Jersey | 10.75% | Multiple brackets | | New York | 10.9% | Plus New York City tax for residents | | Oregon | 9.9% | Multiple brackets | | Minnesota | 9.85% | Multiple brackets | | Massachusetts | 9% | 5% flat plus 4% surtax over $1M |
On the low end, nine states tax no wage income. Among states that do tax wages, some of the lowest headline rates are Pennsylvania (3.07%), Indiana (3.0%), Kentucky (4.0%), Michigan (4.25%), North Carolina (4.25%), and Colorado (4.4%).
Again, the headline rate is not your effective rate. A single filer with $60,000 in taxable income in a graduated state might pay an effective rate in the mid-single digits, not the top rate. In a flat-tax state, the effective rate is close to the flat rate, though deductions and credits can lower it further.
States With No Income Tax or Low Rates
The nine states that do not tax wages are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Washington does tax certain long-term capital gains above a threshold, and New Hampshire no longer taxes interest and dividends as of 2025. Tennessee repealed its Hall income tax on most investment income in 2021.
No income tax does not mean no taxes. Consider the full picture:
- Property taxes: Texas and New Hampshire have no wage tax, but both rank among the states with the highest effective property tax rates.
- Sales taxes: Tennessee, Nevada, Washington, and Louisiana have high combined state and local sales tax rates.
- Local income taxes: Ohio, Pennsylvania, Indiana, Maryland, New York, and Michigan allow local income taxes that can add roughly 1% to 4% or more.
- Retirement income: Many states exempt Social Security benefits, and some exempt pensions up to certain limits. Rules change often, so check current guidance.
- Cost of living and wages: A lower tax rate in a state with lower average pay may not leave you with more after all expenses.
How to Calculate Your State Income Tax Bill
You can estimate your state income tax with a few steps:
- Determine your residency status. Full-year residents pay tax on all income. Part-year residents and nonresidents generally pay tax only on income earned in the state. Some states have reciprocity agreements for commuters.
- Find your state's starting point. Most states start with federal adjusted gross income or federal taxable income. Read the instructions for your state's return.
- Make state adjustments. Add back items your state taxes, such as certain out-of-state bond interest. Subtract items your state exempts, such as some retirement income or disability pay.
- Subtract deductions and exemptions. State standard deductions vary widely, and some states offer no standard deduction at all.
- Apply the rate schedule. For a flat tax, multiply taxable income by the rate. For graduated brackets, calculate tax bracket by bracket.
- Subtract credits. Look for state earned income tax credits, child and dependent care credits, property tax credits, and other incentives.
- Add local taxes. If you live or work where a city, county, or school district imposes an income tax, calculate that amount separately.
Example: Suppose you are a single filer with $70,000 in state taxable income. In a flat-tax state with a 4.95% rate, your state tax is $3,465. In a no-wage-tax state, it is $0. In a graduated state, you would split income across brackets, and only the top slice would face the highest rate.
Key Factors Beyond the Rate
When comparing state income tax rates, avoid looking only at the top number. A state with no income tax may have above-average property or sales taxes, while a state with a higher income tax may offer generous credits, lower property taxes, or exemptions for retirement income.
Also remember that withholding is not the same as liability. Your employer withholds based on the state W-4 or equivalent form. If you had a major life change, such as a new job, marriage, or move, check your withholding to avoid a balance due or an unnecessary refund.
Bottom Line
State income tax rates range from 0% in nine states that do not tax wages to top marginal rates above 13% in California. But the top rate is rarely the rate you pay. Your effective rate depends on your taxable income, filing status, deductions, credits, and local taxes. To estimate your bill, start with your state revenue department's instructions or a reputable tax calculator. If you are considering a move, compare the full tax picture — income, property, sales, and local taxes — rather than the headline rate alone.
