State income tax


In addition to federal income tax collected by the United States, most individual U.S. states collect a state income tax. Some local governments also impose an income tax, often based on state income tax calculations. 41 states, the District of Columbia, and many localities in the United States impose an income tax on individuals. Nine states impose no state income tax. Forty-seven states and many localities impose a tax on the income of corporations.
State income tax is imposed at a fixed or graduated rate on taxable income of individuals, corporations, and certain estates and trusts. These tax rates vary by state and by entity type. Taxable income conforms closely to federal taxable income in most states with limited modifications. States are prohibited from taxing income from federal bonds or other federal obligations. Most states do not tax Social Security benefits or interest income from obligations of that state. In computing the deduction for depreciation, several states require different useful lives and methods be used by businesses. Many states allow a standard deduction or some form of itemized deductions. States allow a variety of tax credits in computing tax.
Each state administers its own tax system. Many states also administer the tax return and collection process for localities within the state that impose income tax.
State income tax is allowed as an itemized deduction in computing federal income tax, subject to limitations for individuals.

Basic principles

State tax rules vary widely. The tax rate may be fixed for all income levels and taxpayers of a certain type, or it may be graduated. Tax rates may differ for and .
Most states conform to federal rules for determining:
  • gross income,
  • timing of recognition of income and deductions,
  • most aspects of business deductions,
  • characterization of business entities as either corporations, partnerships, or disregarded entities.
Gross income generally includes all income earned or received from whatever source with some exceptions. States are prohibited from taxing income from federal bonds or other federal obligations. Most states also exempt income from bonds issued by that state or localities within the state as well as some portion or all of Social Security benefits. Many states provide tax exemption for certain other types of income, which varies widely by state. States uniformly allow reduction of gross income for cost of goods sold, though the computation of this amount may be subject to some modifications.
Most states provide for modification of both business and non-business deductions. All states taxing business income allow deduction for most business expenses. Many require that depreciation deductions be computed in manners different from at least some of those permitted for federal income tax purposes. For example, many states do not allow the additional first year bonus depreciation deduction.
Most states tax capital gain and dividend income in the same manner as other investment income. In this respect, individuals and corporations not resident in the state generally are not required to pay any income tax to that state with respect to such income.
Some states have alternative measures of tax. These include analogs to the federal Alternative Minimum Tax in 14 states, as well as measures for corporations not based on income, such as capital stock taxes imposed by many states.
Income tax is self assessed, and individual and corporate taxpayers in all states imposing an income tax must file tax returns in each year their income exceeds certain amounts determined by each state. Returns are also required by partnerships doing business in the state. Many states require that a copy of the federal income tax return be attached to their state income tax returns. The deadline for filing returns varies by state and type of return, but for individuals in many states is the same as the federal deadline, typically April 15.
Every state, including those with no income tax, has a with power to examine and adjust returns filed with it. Most tax authorities have appeals procedures for audits, and all states permit taxpayers to go to court in disputes with the tax authorities. Procedures and deadlines vary widely by state. All states have a statute of limitations prohibiting the state from adjusting taxes beyond a certain period following filing returns.
All states have tax collection mechanisms. States with an income tax require employers to withhold state income tax on wages earned within the state. Some states have other withholding mechanisms, particularly with respect to partnerships. Most states require taxpayers to make quarterly estimated tax payments not expected to be satisfied by withholding tax.
All states impose penalties for failing to file required tax returns and/or pay tax when due. In addition, all states impose interest charges on late payments of tax, and generally also on additional taxes due upon adjustment by the taxing authority.

Individual income tax

Forty-three states impose a tax on the income of individuals, sometimes referred to as personal income tax. State income tax rates vary widely from state to state. States imposing an income tax on individuals tax all taxable income of residents. Such residents are allowed a credit for taxes paid to other states. Most states tax income of nonresidents earned within the state. Such income includes wages for services within the state as well as income from a business with operations in the state. Where income is from multiple sources, formulary apportionment may be required for nonresidents. Generally, wages are apportioned based on the ratio days worked in the state to total days worked.
All states that impose an individual income tax allow most business deductions. However, many states impose different limits on certain deductions, especially depreciation of business assets. Most states allow non-business deductions in a manner similar to federal rules. Few allow a deduction for state income taxes, though some states allow a deduction for local income taxes. Six of the states allow a full or partial deduction for federal income tax.
In addition, some states allow cities and/or counties to impose income taxes. For example, most Ohio cities and towns impose an income tax on individuals and corporations. By contrast, in New York, only New York City and Yonkers impose a municipal income tax.
In June 2025, the Puerto Rican Senate approved House Bill 505, which imposes a 4% tax on new individual beneficiaries under Law 60-2019, known as the Puerto Rican Incentives Code. The bill is part of a broader review of the tax incentive system, amid a public debate on the law's real benefits for the local economy.

States with no individual income tax

Nine U.S. states do not levy a broad-based individual income tax.
  1. Alaska - no individual tax but has a state corporate income tax. Alaska has no state sales tax, but lets local governments collect their own sales taxes. Alaska has an annual Permanent Fund Dividend, derived from oil revenues, for all citizens living in Alaska after one calendar year, except for some convicted of criminal offenses.
  2. Florida - no individual income tax but has a 5.5% corporate income tax. The state once had a tax on "intangible personal property" held on the first day of the year, but it was abolished at the start of 2007.
  3. Nevada - no individual or corporate income tax. Nevada gets most of its revenue from sales taxes as well as taxes on the gambling and mining industries.
  4. New Hampshire - The accelerated phase-out of a tax on dividends and interest completed at the start of 2025. For large businesses, the 0.55% Business Enterprise Tax is essentially an income tax. The state also has a 7.5% Business Profits Tax.
  5. South Dakota – no individual income tax but has a state franchise income tax on financial institutions.
  6. Tennessee – has no individual income tax. In 2014 voters approved an amendment to the state constitution prohibiting state or local governments from levying any income tax. Prior to January 1, 2021 Tennessee had the "Hall income tax", a tax on certain interest and dividend income from investments.
  7. Texas - no individual income tax but imposes a franchise tax on corporations. In May 2007, the legislature modified the franchise tax by enacting a modified gross margin tax on certain businesses, which was amended in 2009 and again in 2023, both times to increase the exemption level. The Texas Constitution bans the passage of an income tax with a 2/3 majority of the legislature required to repeal the ban. Local governments have no authority to impose personal or corporate income taxes.
  8. Washington - no individual tax but has a business and occupation tax on gross receipts, applied to "almost all businesses located or doing business in Washington." It varies from 0.138% to 1.9% depending on the type of industry. In July 2017, the Seattle City Council approved an income tax on Seattle residents, making the city the only one in the state with an income tax, but it was ruled unconstitutional by the King County Superior Court. The Court of Appeals upheld that ruling and the Washington Supreme Court declined to hear the case. In 2022 Washington began taxing capital gains exceeding $250,000.
  9. Wyoming - no individual or corporate income taxes.

    States with flat rate individual income tax

As of 2025, 14 states have a flat rate individual income tax:
  1. Arizona – 2.50%
  2. Colorado – 4.40%
  3. Georgia – 5.39%
  4. Idaho – 5.695%
  5. Illinois – 4.95%
  6. Indiana – 3.00%
  7. Iowa – 3.80%
  8. Kentucky – 4.00%
  9. Louisiana – 3.00%
  10. Michigan – 4.25%
  11. Mississippi – 4.40%
  12. North Carolina – 4.25%
  13. Pennsylvania – 3.07%
  14. Utah – 4.55%

    States with local income taxes in addition to state-level income tax

The following states have local income taxes. These are generally imposed at a flat rate and tend to apply to a limited set of income items.
Alabama:
California:
  • San Francisco
Colorado:
Delaware:
  • Wilmington
Indiana :
  • All counties
Iowa :
Kansas:
  • Some counties and municipalities
Kentucky:
Maryland :
Michigan:
Missouri :
  • Kansas City
  • St. Louis
New Jersey:
  • Newark
New York :
  • New York City
  • Yonkers
  • Metropolitan Commuter Transportation District
Ohio:
  • Some school districts.
  • RITA.
  • Most cities and villages on earned income and rental income. Some municipalities require all residents over a certain age to file, while others require residents to file only if municipal income tax is not withheld by employer. Income is reported on a tax form issued by the municipal income tax collector, currently Cleveland's Central Collection Agency or the Regional Income Tax Authority, or a collecting municipality. Municipalities such as Columbus and Cincinnati sometimes also collect for neighboring towns and villages.
Oregon:
  • Portland
  • Lane Transit District
  • Tri-County Metropolitan Transportation District
  • Other transit districts
Pennsylvania:
West Virginia: