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When Ben Franklin said nothing in life was certain but death and taxes, he certainly left out some details. In the U.S., federal income taxes are consistent across the country, but personal income taxes vary substantially from state to state. Depending on where you live and how much income you earn, the state income taxes you pay may be high, low or even nonexistent. Are you thinking of moving to another state to lower your tax rates? Are you curious where your state ranks? Let's take a quick state-by-state tour of income taxes to learn more.
How Does Income Tax Work?
State income taxes generally follow one of three models:
No taxes: Eight states don't collect any personal income taxes.
Flat tax rates: All of your taxable income—after personal deductions and exemptions—is subject to the same tax rate. To estimate your tax bill in a flat-rate state, simply multiply the taxable income on your current tax return by the state's current tax rate.
Graduated tax rates: A majority of states use graduated tax brackets that are similar to the tax brackets used on your federal income taxes. In these states, your income is divided into brackets that are each taxed at their own rate, with the lowest brackets having the lowest rates.
Using Rhode Island's graduated tax rates as an example, here's how it works. A single taxpayer making $160,000 per year pays the following taxes:
- Bracket 1: Their first $66,200 is taxed at 3.75%.
- $66,200 x 3.75% = $2,482.50
- Bracket 2: A second portion of their income, $84,350, is taxed at 4.75%.
- $84,350 x 4.75% = $4,006.63
- Bracket 3: The remaining $9,450 is taxed at 5.99%.
- $9,450 x 5.99% = $566.06
- To get the total: Add the three brackets together.
- $2482.50 + $4006.63 + $566.06 = $7,055.19
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. The dollar amounts for each bracket vary significantly from state to state, as do the rate at which each bracket is taxed.
Tax Rates, State by State
Estimating how much tax you would personally pay in every state requires a bit of math. And since deductions, exemptions and a slew of other factors are not consistent state to state—and can make a serious difference in the amount of tax you would pay—there's no shortcut that lets you see instantly what your tax bill would be. You can, however, have a look at tax rates, state by state. Here are the ranges of tax rates in every state:
|Tax Rates for All 50 States and D.C.|
|Alabama||2% to 5%|
|Arizona||2.59% to 8%|
|Arkansas||2% to 5.9%|
|California||1% to 13.3%|
|Connecticut||3% to 6.99%|
|Delaware||2.2% to 6.6%|
|District of Columbia||4% to 8.95%|
|Georgia||1% to 5.75%|
|Hawaii||1.4% to 11%|
|Idaho||1.125% to 6.925%|
|Iowa||0.33% to 8.53%|
|Kansas||3.1% to 5.7%|
|Louisiana||2% to 6%|
|Maine||5.8% to 7.15%|
|Maryland||2% to 5.75%|
|Minnesota||5.35% to 9.85%|
|Mississippi||3% to 5%|
|Missouri||1.5% to 5.4%|
|Montana||1% to 6.9%|
|Nebraska||2.46% to 6.84%|
|New Jersey||1.4% to 10.75%|
|New Mexico||1.7% to 5.9%|
|New York||4% to 8.82%|
|North Dakota||1.1% to 2.9%|
|Ohio||2.85% to 4.797%|
|Oklahoma||0.5% to 5%|
|Oregon||4.75% to 9.9%|
|Rhode Island||3.75% to 5.99%|
|South Carolina||0% to 7%|
|Vermont||3.35% to 8.75%|
|Virginia||2% to 5.75%|
|West Virginia||3% to 6.5%|
|Wisconsin||3.54% to 7.65%|
Source: Federation of Tax Administrators
States With No Income Taxes
Eight states have no personal income taxes. They are:
- South Dakota
States With Flat Tax Rates, From Low to High
In 10 states, taxpayers pay the same tax rate across their entire taxable income. Here are the flat-rate states, listed from lowest tax rate to highest:
|Tax Rates for Flax Tax States|
|Kentucky, Massachusetts, New Hampshire||5.00%|
Source: Federation of Tax Administrators
States With the Highest Income Taxes
The states with graduated tax rates are a bit more complicated to rank. That's because your individual tax bill will depend on your taxable income, filing status, applicability of exemptions and deductions, and—of course—how rates are structured.
Looking at rates alone can be misleading. For example, California leads the nation with the highest marginal tax rate: 13.3%. But this rate applies only to incomes of $1 million or more ($1,198,025 for married couples filing jointly). A California married couple with taxable income of $120,000 pays an effective rate that is closer to 4.5%. Here's how this quick estimate plays out:
|State Income Tax for a CA Couple Making $120,000 per Year|
|Tax Rate||For Incomes Greater Than||Taxable Amount (this example)||Tax|
This couple's tax rate doesn't get anywhere near the top rate of 13.3%. In fact, more than half of the couple's income, $66,842, is taxed at 4% or less. Their total tax of $5,417 is just over 4.5% of their taxable income, beating seven of the 10 states with flat tax rates shown above and placing California on the lower end of the effective rate scale among states with graduated tax rates—at least for this hypothetical couple.
Long story short: If you want to know how tax rates apply to you, do a quick estimate using your own income and circumstances. Meanwhile, the top 10 marginal state income tax rates—representing the top income brackets—belong to these states:
- 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%)
- Arizona (8%)
Our hypothetical couple earning $120,000 a year found the highest effective tax rates in Oregon (8.3%), District of Columbia (7.2%), Hawaii (7.0%), South Carolina (6.6%) and Iowa (6.9%).
Finding States With the Lowest Taxes
If you're hoping to move to a state with a low tax burden, personal income tax rates don't get any lower than they are in the eight states with no income taxes. Also check individual states for information on personal exemptions, deductions and other details that can lessen your tax impact. For example, New Hampshire and Tennessee don't tax wages but do tax interest and dividend income—great news if you work for a living, but not as great if you're retired and living off of savings and investments.
Be aware, too, that personal income tax rates don't necessarily translate into lower taxes overall. Wherever you live, you'll also have to contend with sales tax, property tax and local taxes. These can add up, and in fact are often used as alternative ways to raise tax revenue in states that don't rely as heavily on income taxes.
Taxes Are Certain, but Tax Rates Can Vary
For all the variation in tax rates and schemes, the state income taxes you pay are just one factor in your overall financial health: It just happens to be a factor that changes from state to state. If you're curious about the tax burden in your state and how it stacks up against others, run the numbers to estimate your potential tax bills and compare. Any significant difference you find may be a factor in your financial planning, whether you want to stay where you are or move to a tax-friendlier state.