When people talk about taxes, they usually focus on the federal level — brackets, deductions, the IRS. But for many Americans, state income tax is just as important when it comes to how much money you actually take home. Depending on where you live, your state could be taking anywhere from 0% to over 13% of your income.
That is a massive difference, and it is one of the reasons people consider taxes when deciding where to live, where to take a job, or where to retire. Let us take a look at which states have the highest and lowest income taxes and what it means for your wallet.
States With No Income Tax
Nine states have no state income tax at all. If you live in one of these states, 100% of your state income tax line on your paycheck is zero:
- Alaska
- Florida
- Nevada
- New Hampshire (taxes interest and dividends only — but this is being phased out and will be fully eliminated by 2027)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Living in one of these states means you keep more of your paycheck — at least from a state income tax perspective. But before you pack your bags, keep reading. There is more to the story.
To see exactly how much your take-home pay would be in a no-income-tax state versus your current state, try our state tax comparison calculator. It shows you the difference side by side.
States With the Highest Income Taxes
On the other end of the spectrum, some states have income tax rates that take a significant bite out of high earners' paychecks. Here are the states with the highest top marginal rates as of 2025:
- California: 13.3% (the highest in the nation, applying to income over $1 million)
- Hawaii: 11% (on income over $200,000)
- New Jersey: 10.75% (on income over $1 million)
- Oregon: 9.9% (on income over $125,000)
- Minnesota: 9.85% (on income over $193,240)
- New York: 10.9% (on income over $25 million for the top rate, but 9.65% kicks in much earlier)
- Vermont: 8.75% (on income over $229,500)
- Iowa: 5.7% (after recent reforms that lowered the top rate significantly)
- Wisconsin: 7.65% (on income over $405,550)
Keep in mind that these are top marginal rates — they only apply to income above the listed thresholds. Just like federal taxes, most states use progressive brackets. You do not pay the top rate on all your income, only on the portion that exceeds the threshold.
Flat Tax States: One Rate for Everyone
Some states keep it simple with a flat income tax rate — everyone pays the same percentage regardless of income. These include:
- Colorado: 4.4%
- Illinois: 4.95%
- Indiana: 3.05%
- Kentucky: 4.0%
- Massachusetts: 5.0% (plus a 4% surtax on income over $1 million)
- Michigan: 4.25%
- North Carolina: 4.5%
- Pennsylvania: 3.07%
- Utah: 4.65%
Flat tax states are straightforward — there is no bracket math to worry about. You earn $40,000 or $400,000, and the rate is the same (though some states, like Massachusetts, have added surcharges for very high earners).
But Wait — Low Income Tax Does Not Always Mean Low Taxes
This is a really important point that gets overlooked all the time. States that do not charge income tax still need revenue to pay for roads, schools, police, and everything else. They just get that money from other sources — and those other taxes can hit just as hard.
Sales tax. Some no-income-tax states have high sales taxes. Tennessee, for example, has a combined state and local sales tax rate that can exceed 9.5%. Washington state's combined rate can top 10% in some areas. Texas has a 6.25% state sales tax plus local additions. You can estimate the impact using our sales tax calculator.
Property tax. Texas is famous for having no state income tax, but its property taxes are among the highest in the nation — averaging about 1.6% to 1.8% of a home's assessed value. On a $400,000 home, that is $6,400 to $7,200 per year. New Hampshire also has very high property taxes.
Other fees and taxes. Some states have higher vehicle registration fees, higher gas taxes, or other charges that add up. The lack of an income tax does not mean you are paying less overall — it just means you are paying differently.
How State Taxes Affect Your Take-Home Pay: A Real Example
Let us compare two people earning the same salary in different states to see how much state taxes actually matter.
Scenario: Single filer, $85,000 annual salary, no special deductions.
Living in Texas (no state income tax):
- Federal income tax: approximately $11,600
- FICA taxes (Social Security + Medicare): approximately $6,503
- State income tax: $0
- Approximate take-home pay: $66,897
Living in California:
- Federal income tax: approximately $11,600
- FICA taxes: approximately $6,503
- State income tax: approximately $3,200
- Approximate take-home pay: $63,697
That is about $3,200 more per year in your pocket just from the income tax difference. Over a decade, it adds up to $32,000. But if you are renting a comparable apartment in Austin versus San Francisco, the rent difference alone could dwarf that tax savings — or if you own property in Texas, the property taxes might eat into it.
The point is: do not look at income tax in isolation. You need to consider the full picture, including cost of living. Our cost of living calculator can help you compare what your salary is really worth in different cities and states.
State Tax Trends: What Is Changing?
The trend in recent years has been for states to lower their income tax rates. Several states have cut rates or moved toward flat taxes:
- Iowa has been steadily reducing its rates and is moving toward a flat 3.9% rate.
- Arizona moved to a flat 2.5% rate.
- North Carolina has been cutting its flat rate and is on track to reduce it further.
- Several states have discussed eliminating income tax entirely, though few have followed through.
On the other hand, some high-tax states have added surcharges on the wealthy. Massachusetts voters approved a 4% surtax on income above $1 million. New York has multiple high-income surcharges.
State Taxes and Remote Work
The rise of remote work has made state taxes even more relevant. If you live in Texas but work remotely for a company based in New York, which state gets to tax your income? The rules are complicated and vary by state.
Some states, like New York, have a "convenience of the employer" rule — if you work remotely for your own convenience (rather than because your employer requires it), New York may still tax your income as if you were working there. This has led to some messy situations where people are taxed by both their home state and the state where their employer is located.
If you are a remote worker, it is worth understanding your state's rules — and potentially the rules of the state where your employer is based. Our salary calculator lets you select your state so you can see state-specific tax calculations.
Using This Information When Making Decisions
State taxes should be one factor in your financial decisions, but they should not be the only factor. Here are some practical ways to use this information:
Comparing job offers. A job paying $100,000 in Florida is worth more than the same salary in California — but only if the cost of living is comparable. Our salary comparison calculator helps you evaluate offers across different locations.
Planning for retirement. Many retirees move to no-income-tax states to stretch their retirement savings further. If your retirement income will come from 401(k) withdrawals and Social Security, the state tax on that income matters a lot.
Side hustles and freelancing. If you are self-employed, you pay state income tax in the state where you live (and sometimes where you perform the work). Understanding your state's rates helps you set aside the right amount for taxes. Our side hustle tax calculator includes state taxes in its estimates.
The Bottom Line
State income taxes vary wildly across the US, from 0% to over 13%. Where you live makes a real difference to your take-home pay. But remember — states without income tax often make up for it with higher sales taxes, property taxes, or other fees.
The smartest approach is to look at your total tax burden and overall cost of living, not just one line item. Use our state tax comparison calculator to see how different states stack up for your specific income level, and make decisions based on the full picture.