State Income Tax
Income tax levied by individual states, in addition to federal income tax. Rates and structures vary widely — some states have no income tax, while others have rates up to 13.3%.
State income tax is a tax imposed by most US states on individual and/or business income, collected in addition to federal income tax. As of 2025, 41 states and the District of Columbia impose a broad-based individual income tax. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no state income tax on wages (New Hampshire and Washington tax only certain investment income).
State income tax systems fall into three categories: progressive (with multiple brackets and increasing rates), flat (a single rate applied to all income), and no-income-tax states. Tax rates vary dramatically — states like California top out at 13.3%, while flat-tax states like Pennsylvania charge 3.07% and Colorado charges 4.4%.
State income taxes paid are deductible on your federal return as part of the SALT deduction. Under OBBBA (2025+) the cap is $40,000 ($20,000 MFS), phasing out above $500,000 MAGI ($250,000 MFS) toward a $10,000 floor; pre-OBBBA (2018–2024) the cap was $10,000. Your state of residence determines which state taxes your income, although you may also owe tax to states where you work or earn income, subject to credits for taxes paid to other states.
How it works
State income tax is a separate layer of tax on top of federal income tax, imposed by most — but not all — US states, and the structure varies enormously from state to state. As of 2025, 41 states plus the District of Columbia impose a broad-based individual income tax, while nine states have no state income tax on wages at all, though two of those nine still tax certain investment income.
You meet state income tax through your state return, filed alongside or shortly after your federal return, using a structure that falls into one of three categories: progressive, with multiple brackets and rising rates, flat, with one rate for all income, or no tax at all. Where you live generally determines which state taxes your income, though working across state lines can create tax obligations in more than one state, usually offset by a credit for taxes paid to the other state.
The rate spread between states is dramatic — a state like California tops out at 13.3%, while flat-tax states like Pennsylvania charge just 3.07% — which is why people relocating between states are often surprised by how much their overall tax burden shifts. State income tax paid is also relevant on your federal return: it counts toward the SALT deduction, capped under OBBBA (2025+) at $40,000 ($20,000 MFS) with a phaseout above $500,000 MAGI toward a $10,000 floor, versus the flat $10,000 cap that applied from 2018 through 2024.
Example: comparing state tax burden between two states
A remote worker earning $90,000 a year is considering a move from a no-income-tax state to a state with a progressive income tax structure with rates that reach into the mid single digits at that income level.
Even a modest effective state rate of, say, 4% on $90,000 of income adds roughly $3,600 a year in state tax that the worker was not paying before — a cost worth weighing alongside cost of living when comparing states to relocate to.
Frequently asked questions
Which states have no state income tax?
Can I owe state income tax to more than one state in the same year?
Is state income tax deductible on my federal return?
Related Terms
Progressive Tax
A tax system where rates increase as income rises, with higher earners paying a larger percentage. The US federal income tax and most state income taxes use progressive brackets.
Flat Tax
A tax system with a single rate applied to all income levels. Several US states use flat income tax rates, including Illinois (4.95%), Colorado (4.4%), and Pennsylvania (3.07%).
SALT Deduction
An itemized deduction for state and local taxes paid, including income tax (or sales tax) and property tax. Under OBBBA (2025+), capped at $40,000 per return ($20,000 MFS) with phaseout above $500,000 MAGI to a $10,000 floor. Pre-OBBBA (2018–2024) the cap was $10,000 flat.
SALT Cap
The annual limit on the federal deduction for state and local taxes. Pre-OBBBA (2018–2024): $10,000. OBBBA (2025+): $40,000 ($20,000 MFS) with phaseout above $500,000 MAGI to a $10,000 floor.