2023 State's Individual Income Tax Rate (7 States Pay Nothing!)

Compare the varying state income tax rates and what the average resident will pay on what they earn.

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What is income tax?

Income tax is like a bill the government gives to people and businesses based on the money they earn. This money is very important to the government because they use it to pay for things like building roads, running schools, helping people who are sick, and keeping the country safe. The money people earn can come from different places like their jobs, owning a business, or money made from investments. When it's time to pay income tax, sometimes people can pay less if they spent money on certain things, or if they qualify for special tax credits. There are two ways this tax can be calculated. One way is that everyone pays the same percentage of what they earn, which is called a flat rate. Another way is that people who make more money pay a higher percentage, which is called a progressive rate. In the United States, and in most countries, it's the law to pay income tax. If you don't pay it, you can get in trouble. The rules for income tax can be different depending on where you live. Usually, once a year, people have to fill out special forms that tell the government how much money they made and how much tax they owe.

What is the difference between state and federal income tax?

State and federal income taxes are two types of taxes that people have to pay. The federal income tax is the same all across the U.S., and the more money you make, the more tax you have to pay. This money helps pay for things that the whole country needs, like the military, foreign relations, social security, and healthcare. State income taxes are different in every state. Some states make everyone pay the same percentage, no matter how much they make. Others have different tax rates depending on income, like the federal tax. Some states don't have an income tax at all. Money from state taxes helps pay for things the state needs, like schools, roads, and health services. If you live in a state with a state income tax, you usually have to file a federal tax return and a state tax return every year.

What is a tax bracket?

A tax bracket is like a group for different amounts of income, and each group gets taxed at a different rate. This is part of a system called a progressive tax, where people who make more money pay a higher tax rate. Let's say there are brackets for incomes up to $10,000, from $10,001 to $20,000, and so on. Each of these brackets has its own tax rate. So, if you make $15,000, you pay 10% tax on the first $10,000 and 15% tax on the extra $5,000. This system tries to make it fair by asking people who make more money to pay more in taxes.

What is a flat tax rate?

A flat tax means everyone pays the same percentage of their income in taxes, no matter how much money they make. Let's say the tax rate is 10%. If you make $10,000, you pay $1,000 in taxes. If you make $100,000, you pay $10,000 in taxes. People who like this system say it's easy to understand. But some people don't like it because they think it's harder on people who don't make a lot of money. These people end up spending more of what they earn on taxes compared to people who make a lot of money.

Income Tax By State

State State Income Tax Rate Tax Structure Median Household Income
Alaska0%No State Income Tax$76,715
Florida0%No State Income Tax$55,660
Nevada0%No State Income Tax$63,276
New Hampshire5% on interest and dividendsFlat$81,346
New Jersey1.4-10.75%Brackets$85,751
New Mexico1.7-4.9%Brackets$51,945
New York4-8.82%Brackets$72,108
North Carolina5.25%Flat$57,341
North Dakota1.1-2.9%Brackets$64,577
Rhode Island3.75-5.99%Brackets$71,169
South Carolina0-7%Brackets$56,227
South Dakota0%No State Income Tax$59,533
Tennessee1% on interest and dividendsFlat$56,071
Texas0%No State Income Tax$64,034
Washington0%No State Income Tax$78,687
West Virginia3-6.5%Brackets$48,850
Wyoming0%No State Income Tax$65,003

Did you know that there are seven states in the United States that don't impose any income tax on their residents? These states are:

1. Alaska

2. Florida

3. Nevada

4. South Dakota

5. Texas


7. Wyoming.

There are a two other states who are very close to having no state income tax - Tennessee and New Hampshire - which only tax interest and dividend income while exempting other forms of income. This special tax structure in these states gives individuals the advantage of not paying income tax on their salaries. It's no wonder why these states attract taxpayers looking for financial benefits!

Just because a state doesn't have an income tax doesn't always mean people living there pay less in taxes. These states often get money in other ways. They might have higher taxes on things you buy or own, like your house or your car, or on things like gas, alcohol, and cigarettes. They might also charge more for certain services or licenses. So, even though people living in these states don't pay income tax, they might end up paying more because of these other taxes and fees. Also, for families that don't make a lot of money, these other taxes can be harder to handle. For instance, sales tax on stuff you buy takes a bigger bite out of a smaller paycheck. So, how much you end up paying in taxes in a state without income tax really depends on lots of things, like how much money you make, what you own, and what you spend your money on.

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