State Income Taxes

Residents of certain states must pay annual income taxes to their state and to the federal government. Each state calculates and collects individual income taxes differently. Most states use progressive tax brackets like the federal government, but some levy taxes based on a single flat rate.

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  • Updated: December 1, 2022
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APA Schell, J. (2022, December 1). State Income Taxes. Annuity.org. Retrieved December 6, 2022, from https://www.annuity.org/personal-finance/taxes/income-tax/state/

MLA Schell, Jennifer. "State Income Taxes." Annuity.org, 1 Dec 2022, https://www.annuity.org/personal-finance/taxes/income-tax/state/.

Chicago Schell, Jennifer. "State Income Taxes." Annuity.org. Last modified December 1, 2022. https://www.annuity.org/personal-finance/taxes/income-tax/state/.

Of America’s 50 states, 43 require their residents to pay state income taxes in addition to the federal income tax collected annually by the Internal Revenue Service (IRS). Each state has its own income tax rules.

Most states with income taxes use progressive tax brackets similar to the federal income tax system. However, most states have fewer brackets than those defined by the federal government.

As of July 2022, nine states have a flat tax, meaning all income in that state is taxed at the same rate. The states with a flat income tax are Colorado, Kentucky, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania and Utah. Three more states — Georgia, Iowa and Mississippi — are slated to phase out their current tax brackets in favor of flat individual income tax rates in the coming years.

Which States Have the Highest Income Taxes?

Among states using progressive income tax systems, California has the highest marginal tax rate in the country with top rates maxing out at 13.3%. In second place is Hawaii, which has a top marginal income tax rate of 11%. The state with the third highest income taxes is New York, taxing its top earners at 10.9%.

The states with the highest flat tax rates on individual income are Kentucky and Massachusetts, which both collect a 5% tax on their citizens’ income. North Carolina is next with a 4.99% flat individual income tax and Illinois and Utah tie for third with their 4.95% flat individual income tax rate.

Which States Have the Lowest Income Taxes?

Seven states do not tax individual income at all. These states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming — therefore have the lowest income tax rates in the nation at 0%.

Two states tax income in other ways: New Hampshire collects its 5% tax on dividends and interest income only, while Washington imposes a 7% tax on capital gains income only.

Of the states collecting a flat individual income tax, Pennsylvania levies taxes at the lowest rate of 3.07%. Indiana taxes individual income at the second lowest rate of 3.23%. In third place is Michigan with a 4.25% flat income tax rate.

States that use progressive tax brackets tend to have higher top tax rates than the flat tax states, but there are a few exceptions. North Dakota has the lowest progressive income tax rates in the country with a max of 2.90%. The highest bracket of Ohio’s tax system has only a 3.99% tax rate, making it the second lowest income tax rate among states using tax brackets. In third place is Louisiana, with a top marginal tax rate of 4.25%.

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Which States Have Income Tax Exemptions?

Many states that collect individual income taxes allow for personal exemptions, meaning a certain amount can be claimed as a deduction to your total taxable income. Personal exemptions help to ensure that poor households have less income tax liability or even no income tax liability at all. These exemptions also tie income tax liability to family size.

Certain states allow you to claim personal income tax exemptions for individuals, couples and/or dependents. Each state sets its own exemption amounts for these categories. Some states tie the exemptions to the federal tax code, while others set their own standards.

Personal Income Tax Exemptions by State
StateSingle ExemptionCouple Exemption Dependent Exemption
Alabama$1,500$3,000$1,000
Connecticut$15,000$24,000$0
Georgia$2,700$7,400$3,000
Hawaii$1,144$2,288$1,144
Illinois$2,375$4,750$2,735
Indiana$1,000$2,000$1,000
Kansas$2,250$4,500$2,250
Louisiana$4,500$9,000$1,000
Maine$4,450$8,900n.a.
Maryland$3,200$6,400$3,200
Massachusetts$4,400$8,800$1,000
Michigan$5,000$10,000$5,000
Minnesotan.a.n.a.$4,450
Mississippi$6,000$12,000$1,500
Montana$2,580$5,160$2,580
New Hampshire$2,400$4,800n.a.
New Jersey$1,000$2,000$1,500
New Mexicon.a.n.a.$4,000
New Yorkn.a.n.a.$1,000
Ohio$2,400$4,800$2,400
Oklahoma$1,000$2,000$1,000
Rhode Island$4,350$8,700$4,350
South Carolinan.a.n.a.$4,300
Vermont$4,350$8,700$4,350
Virgina$930$1,860$930
West Virginia$2,000$4,000$2,000
Wisconsin$700$1,400$700
Source: Tax Foundation

Some states provide income tax relief in the form of tax credits. Tax credits differ from personal exemptions since a tax credit directly reduces your tax liability as opposed to exempting a portion of your income from taxation.

Nine states offer tax credits for individuals, couples and/or dependents.

Income Tax Credits by State
StateSingle Tax CreditCouple Tax Credit Dependent Tax Credit
Arizonan.a.n.a.$100
Arkansas$29$58$29
California$129$258$400
Delaware$110$220$110
Iowa$40$80 $40
Mainen.a.n.a.$300
Nebraska$146$292$146
Oregon$219$436$219
Utahn.a.n.a.$1,750
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Last Modified: December 1, 2022
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5 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Tax Policy Center. (2020, May). What Are Personal Exemptions? Retrieved from https://www.taxpolicycenter.org/briefing-book/what-are-personal-exemptions
  2. Tax Policy Center. (2020, May). What Are Tax Credits and How Do They Differ From Tax Deductions? Retrieved from https://www.taxpolicycenter.org/briefing-book/what-are-tax-credits-and-how-do-they-differ-tax-deductions
  3. USA.gov. (n.d.). State and Local Taxes. Retrieved from https://www.usa.gov/state-taxes
  4. Vermeer, T. & Loughead, K. (2022, February 15). State Individual Income Tax Rates and Brackets for 2022. Retrieved from https://taxfoundation.org/state-income-tax-rates-2022/
  5. Walczak, J. (2022, April 26). States Inaugurate a Flat Tax Revolution. Retrieved from https://taxfoundation.org/flat-tax-state-income-tax-reform/