Takeaway
State income taxes are a tax enforced by a state’s government that apply to any money earned in — and sometimes outside — of a certain state. These taxes affect most individuals and organizations and failing to file accurately and on time can spur consequences like fines, audits and other costly penalties. Read how state income taxes work, how they’re calculated and the individual rates for 2025 in each state that maintains them.
The federal government isn’t the only authority that requires payroll taxes.
In fact, a company must adhere to an income tax law — or several — for every state where it operates. While many may rely on a precedent set by federal regulations, some rely on their own unique tax structures. While potentially difficult to manage, state income taxes are vital to fund:
- health care programs
- public and higher education
- maintenance of roads, highways and other forms of transportation
- and other vital services and initiatives
But with so many potential taxes, it can be hard to identify and verify the laws that affect your organization. Luckily, we’ll help you understand what state income tax is, how to calculate it and the specific income tax rates for each state.
What is state income tax?
A state income tax is a tax enforced by a state’s government on income earned in (and sometimes from) the state. Certain laws may be specific to money earned specifically in that state, while others may place a tax on income generated from anywhere.
Additionally, individuals and organizations have to report this on taxes. Like with federal taxes, this means companies and taxpayers must file tax returns every year. Failing to pay or report state income taxes timely and accurately can result in:
- fines
- audits
- interest
- and other penalties
Factors affecting state income tax
State income tax doesn’t always depend on flat, static rate. From the different filing statuses to income brackets and more, the total state taxes owed can vary between taxpayers. With this in mind, let’s explore the variables that impact state income taxes.
Annual income
An employee could pay higher (or less) state taxes depending on what they earn each year. For example, certain states may apply more taxes to those with a higher annual income. Some employees may even be exempt from a state tax outright if their income falls below a certain threshold.
Filing statuses
A tax filing status determines how an individual’s income is taxed. These five filing statuses can have a significant impact on an employee’s overall tax burden:
- single
- married filing jointly
- married filing separately
- head of household
- qualifying widow(er)
Exemptions
Taxpayers with an exemption may omit all or certain income from their filing. Both organizations — like some charities or nonprofits — and individuals may qualify for a tax exemption.
Keep in mind an exemption isn’t a deduction. Rather, it completely lowers the amount that can be taxed, meaning a percentage-based tax will be derived from the post-exemption amount.
Tax deductions
Deductions reduce a taxpayer’s taxable income based on status, hardship, inflation and more. Deductions tend to take one of two forms:
- Standard deduction or a categorical deduction that combines the basic deduction with any additional deductions for age or disability.
- Itemized deductions or a list of deductions that a taxpayer may be required to provide through a Schedule A (Form 1040).
In most cases, a standard deduction offers a simpler route. However, some taxpayers may be required to provide an itemized deduction, such as if someone is filing on behalf of an estate or trust.
Tax credits
A tax credit reduced the income tax an individual or organization owes. Refundable tax credits can increase a tax return, whereas nonrefundable tax credits don’t convert to a return after they help completely reduce any owed taxes.
States with no income tax
Nearly every state maintains an income tax — except nine. They are:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
How to calculate state income tax in 2025
In most cases, taxpayers should consult a licensed tax professional and use their state’s income tax calculator to help confirm their eligibility. Even so, income tax is influenced by three primary factors:
- taxable income
- a state’s effective tax rate
- a state’s marginal tax rate
A marginal tax rate aligns with the highest income bracket a taxpayer reaches. An effective tax rate, on the other hand, is the actual percentage an employee pays on their entire taxable income. (Remember, one’s income may fall into more than one bracket, so the marginal tax rate can’t always be used to accurately calculate tax liability.)
For most Americans, advisors recommend taxpayers rely on their state’s effective tax rate to prepare for filing. But those in a higher income bracket should generally rely on the marginal tax rate for planning.
Regardless, taxpayers should consult their local government’s site to verify the income taxes that apply to their unique situation.
Download our 2025 State Income Tax Rates Guide
When to file state income taxes in 2025
When income taxes are due varies among the states that collect them. For most, taxpayers must file their state tax returns for 2024 by April 15. Keep the following information in mind for states with less common due dates:
| State | Due date for 2024 taxes |
| Delaware | April 30 |
| Hawaii | April 21 |
| Iowa | April 30 |
| Louisiana | May 15 |
| New Mexico | April 30 |
| Oklahoma | April 20 |
| South Carolina | May 1 |
| Virginia | May 1 |
While many of these dates remain consistent, it’s important for taxpayers to regularly verify this date each year to avoid a late or missed filing.
2025 state income tax rate and brackets (single or married filing separately)
Excluding those without income tax, no two states share identical rates and brackets. For example, Delaware’s highest taxable income bracket caps off at $60,000, whereas New York considers income up to $25 million annually.
Keep the following rates and brackets in mind for single filers:
| State | Single filer tax rates | Single filer tax brackets |
| Alabama | 2%-5% | $0-$3,000 |
| Arizona | 2.5% | Flat rate |
| Arkansas | 2%-3.9% | $0-$4,500 |
| California | 1%-13.30% | $0-$1,000,000 |
| Colorado | 4.4% | Flat rate |
| Connecticut | 2%-6.99% | $0-$500,000 |
| Delaware | 2.2%-6.6% | $2,000-$60,000 |
| Georgia | 5.39% | Flat rate |
| Hawaii | 1.4%-11% | $0-$325,000 |
| Idaho | 5.3% | $4,673 |
| Illinois | 4.95% | Flat rate |
| Indiana | 3% | Flat rate |
| Iowa | 3.8% | Flat rate |
| Kansas | 5.2%-5.58% | $0-$23,000 |
| Kentucky | 4% | Flat rate |
| Louisiana | 3% | Flat rate |
| Maine | 5.8%-7.15% | $0-$63,450 |
| Maryland | 2%-5.75% | $0-$250,000 |
| Massachusetts | 5%-9% | $0-$1,083,150 |
| Michigan | 4.25% | Flat rate |
| Minnesota | 5.35%-9.85% | $0-$198,630 |
| Mississippi | 4.4% | $10,000 |
| Missouri | 2%-4.7% | $1,313-$9,191 |
| Montana | 4.7%-5.9% | $0-$21,100 |
| Nebraska | 2.46%-5.2% | $0-$38,870 |
| New Jersey | 1.4%-10.75% | $0-$1,000,000 |
| New Mexico | 1.5%-5.9% | $0-$210,000 |
| New York | 4%-10.9% | $0-$25,000,000 |
| North Carolina | 4.25% | Flat rate |
| North Dakota | 1.95%-2.5% | $48,475-$244,825 |
| Ohio | 2.75%-3.5% | $26,050-$100,000 |
| Oklahoma | 0.25%-4.75% | $0-$7,200 |
| Oregon | 4.75%-9.9% | $0-$125,000 |
| Pennsylvania | 3.07% | Flat rate |
| Rhode Island | 3.75%-5.99% | $0-$181,650 |
| South Carolina | 0.0%-6.2% | $0-$17,830 |
| Utah | 4.55% | Flat rate |
| Vermont | 3.35%-8.75% | $0-$242,000 |
| Virginia | 2%-5.75% | $0-$17,000 |
| Washington, D.C. | 4%-10.75% | $0-$1,000,000 |
| West Virginia | 2.22%-4.82% | $0-$60,000 |
| Wisconsin | 3.5%-7.65% | $0-$323,290 |
Remember, it’s best practice to consult a licensed tax professional about any potential credits, deductions or to verify a state’s specific tax rate.
Highest state income tax rate
California has the highest state income tax rate at 13.3%.
Lowest state income tax rate
South Carolina has the lowest state income tax rate starting at 0.0%.
Notable 2025 state income tax changes
Nine states — Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina and West Virginia — cut individual income tax rates in 2025, while Iowa and Louisiana moved to flat tax systems.
FAQ
Are state income taxes deductible?
Employees should read the instructions on their state’s certificate of withholding form to determine whether or not their state income taxes may be deducted.
Is the state income tax refund taxable?
Generally, taxpayers who opt for the standard deduction on their federal returns are exempt from paying federal income tax on state tax refunds.
How much state income tax should be withheld?
The amount withheld depends on several factors, including your income level, filing status and place of residence.
Who pays state income taxes?
Most people who earn income and are residents of a state that imposes an income tax pay state income taxes.
When should you pay state income tax?
Filing deadlines vary by state. Most taxpayers must file their state tax returns by April 15.
With Paycom, employees have the option to receive their Form W-2 digitally through our self-service app.
Subscribe to Paycom’s newsletter for important compliance updates.
