The basics

Most states have their own income tax, in addition to federal income tax. Your employer withholds state tax from each paycheck just like federal, based on the state's withholding tables and a state W-4 equivalent (which varies by state).

State income tax rates range from 0% (nine states have no income tax) to over 13% in California. The difference can be thousands of dollars per year for a typical worker.

The 9 states with no income tax

If you live and work in one of these states, you don't pay state income tax on wages:

Alaska
Florida
Nevada
New Hampshire (only taxes interest and dividends, not wages)
South Dakota
Tennessee
Texas
Washington
Wyoming

These states make up the funding from sales tax, property tax, severance taxes (Alaska, Texas, Wyoming), or tourism. The trade-off varies — Florida has high property taxes; Tennessee has high sales tax.

States with the highest income tax

Top marginal rates as of 2025 (rounded):

California — up to 13.3% (highest in the nation)
Hawaii — up to 11%
New York — up to 10.9% (plus NYC adds another 3.876%)
New Jersey — up to 10.75%
Oregon — up to 9.9%
Massachusetts — flat 5% on wages, plus 4% surtax on income over $1M

Most state taxes use brackets like federal tax, with lower rates on lower income and higher rates kicking in at higher income levels.

Flat-tax states

Some states use a flat tax — a single rate that applies to all income:

Arizona — 2.5%
Colorado — 4.4%
Idaho — 5.8%
Illinois — 4.95%
Indiana — 3.05%
Kentucky — 4.5%
Massachusetts — 5%
Michigan — 4.05%
Mississippi — 4.4%
North Carolina — 4.5%
Pennsylvania — 3.07%
Utah — 4.55%

Local income tax

Some cities and counties have their own income tax on top of state tax:

New York City — up to 3.876%
Philadelphia — 3.75% (residents) or 3.44% (commuters)
San Francisco — payroll tax, not on workers directly
Many cities in Ohio, Pennsylvania, Indiana, Maryland, Kentucky — local "earnings tax"

State W-4 equivalents

Most states have their own version of the federal W-4 that you fill out for state withholding. Some use the federal W-4 directly. Common state forms include California DE 4, New York IT-2104, and Illinois IL-W-4. Your employer should provide whichever applies.

Working in one state, living in another

This gets complicated. Generally, you pay tax to the state where you work AND the state where you live, but most states have reciprocity agreements or credits that prevent double taxation. Common scenarios:

Reciprocity states — you only pay tax to the state where you live (e.g., NJ-PA, IL-IN)
Credit states — you pay tax to your work state, then your home state credits what you paid
Remote workers — generally taxed where you physically work, but rules vary

If you're a remote worker, be sure your employer is withholding tax for the right state. Mistakes here can cause big problems at tax time.

State Income Tax on Your Paycheck