Taxes by State: An Overview

Taxes. They are something that nobody looks forward to paying but also something that has to be paid to satisfy Uncle Sam.

Sometimes, taxes get complicated and a lot of people need to seek outside help to properly organize their tax returns. About 28.5% of people who file taxes hire an accountant to do it.

When it comes to your taxes, no two people are in the same situation, especially because taxes by state vary. It depends on a variety of factors such as if you are a W-2 employee or if you are self-employed, how much money you make annually, and even what state you live in.

So, how do you get a better idea of what your tax responsibility is by where you live? This is your guide to state income taxes and all taxes that vary by state.

No Income Tax States

The first thing that you need to understand is that not all states even require their citizens to pay income tax on a state level. You still have to pay federal income taxes no matter where you are but if you eliminate the state level, that is a small percentage of your income that you can keep in your pocket.

The states that do not require you to pay income taxes on a state level are the following:

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

All eight of these states do not have any type of state income tax requirement, which means you get to keep more of the money that you earn if you live in these states.

An example in contrast to this is Oregon, where that state requires you to pay nearly 10% of your income to state taxes if you make a certain amount of money.

Let’s say that you make $100,000 every year. In Oregon, you would have to pay almost $10,000 in state income taxes but in Texas, you do not have to pay a dime to the state. Some people choose to move to one of the states above for that very reason.

Flat Tax Rate States

Another way some states collect state income taxes is by charging a flat rate no matter how much money you make. This means that whether you make $100,000 per year or $30,000 per year, you are paying the same amount in state income taxes.

About 10 states in the country use a system like this. These states are:

  • Colorado
  • Illinois
  • Indiana
  • Kentucky
  • Massachusetts
  • Michigan
  • New Hampshire
  • North Carolina
  • Pennsylvania
  • Utah

The percentage in state income tax varies by state. Pennsylvania has the lowest flat tax rate of these states at 3.07% of your income while North Carolina charges the highest amount at 5.25%.

Some states such as Kentucky, Massachusetts, and New Hampshire like to keep it simple and charge a round number percentage at 5% for state income taxes.

These states can benefit people that make a higher level of income compared to other states because it puts a cap on how much they can be charged in state income tax. Other states such as California can charge as high as 13.3% in state income tax if you meet the highest income bracket requirement of just under $1.2 million.

You can argue that these states are not good to live in if you make a lower level of income because then you are getting charged more than you would in a state that has income tax brackets.

Progressive Tax Rate States

The other 32 states in the country use this system for state income taxes. This basically determines state income tax percentage by how much you make in a year rather than charging a flat rate for everybody.

Basically, the more money that you make in a year, the higher percentage of state income tax you are going to be obligated to have. This system can mean that people that make more money are going to also be paying a lot more in taxes than they would in any of the 18 states above.

The rest of those states do not go higher than 5.25% and eight of the states have no state income tax at all. Meanwhile, the top 10 highest state income tax rates all have percentages that are 8% or higher for the highest income brackets in their respective states.

Let’s take a look at New Jersey’s tax brackets as an example. If you are single and make $25,000 per year, then you would have to pay $368 in state income taxes. Whereas if you make $100,000 per year, you would be responsible for paying as much as $4,242 in state income taxes if you are single.

As you can see, the state income tax obligation can increase significantly in certain states depending on your income level. Some people that are in the highest tax brackets of these states look to move for that very reason to save money on taxes.

Filing taxes can be a little more complicated in these states because not as many people may know the state income tax brackets in these states. In that situation, you may want to file a professional such as one from this link:

Learn More About Taxes By State

The three main things that you need to know about taxes by state are that states will either charge you by income tax brackets, have a flat rate for everybody to pay, or have no state income tax obligation at all.

Of course, there are a few other taxes that also vary by states such as property and sales taxes. Do you want to learn more about those? Check out our Lifestyle section for more.


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