Unlike the federal government, which has a series of tax brackets that apply to all U.S. taxpayers, state-level income tax rates are not standardized. In fact, several states do not even have an income tax but rely on other sources of funds to provide essential services to their residents.
Sources and Uses of Government Funding
If a state collects income taxes, the money is used to pay for state-run programs, which often help the less fortunate, or provide essential services such as police and fire protection. The money is also used to offset the cost of higher education. In fact, half the funds needed to run a local high school might come from state-level income taxes, while the other half is collected through property taxes.
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If property taxes are low, the state income tax rate is low, and sales tax is reasonable, then something has to suffer. In this example, it's probably the quality of the educational system.
State Income Tax Tables
The tables below provide insights into why some locations are popular as retirement communities. For example, Florida is popular with senior citizens and retirees not only because of the climate, but also because there is no state income tax. On the other hand, despite the fact that Nevada does not collect an income tax, they've a large gambling industry that pays licensing fees. The table can be misleading at times, especially if there is a dominant industry.
Tax Facts
Just to demonstrate how varied these rates can be, below are some interesting facts about state income tax.
There are currently seven states that do not collect any income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
There are two states that only collect taxes on dividends and interest income: New Hampshire and Tennessee.
California has the highest incremental state tax rate: 13.3%.
Eight states have only one income tax bracket, charging its residents the same rate on all income, which is called a flat rate: Colorado (4.63%), Illinois (4.95%), Indiana (3.23%), Massachusetts (5.05%), Michigan (4.25%), North Carolina (5.25%), Pennsylvania (3.07%) and Utah (5.0%).
Hawaii now has the largest number of tax brackets (12), ranging from 1.4 to 11.0%.
State Income Tax Tables
Unlike federal income tax rates, the range of income, and the tax rates will vary from state to state. The below table provides the tax rate, number of brackets and income range that applies to each state:
Individual State Income Tax Rates 2021
State | Tax Rate | Brackets | Top Income Range |
Alabama | 2.0 - 5.0% | 3 | $3,000 (S) - $6,000 (M) |
Alaska | None | ||
Arizona | 2.59 - 4.50% | 5 | $159,000 (S) - $318,000 (M) |
Arkansas | 0.9 - 6.9% | 6 | $37,200 |
California | 1.0 - 13.3% | 10 | $1,145,960 |
Colorado | 4.63% | 1 | Flat Rate |
Connecticut | 3.00 - 6.99% | 7 | $500,000 (S) - $1,000,000 (M) |
Delaware | 2.2 - 6.6% | 7 | $60,000 |
Florida | None | ||
Georgia | 1.0 - 5.75% | 6 | $7,000 (S) - $10,000 (M) |
Hawaii | 1.40 - 11.00% | 12 | $200,000 (S) - $400,000 (M) |
Idaho | 1.125 - 6.925% | 7 | $11,554 (S) - $23,108 (M) |
Illinois | 4.95% | 1 | Flat Rate |
Indiana | 3.23% | 1 | Flat Rate |
Iowa | 0.33 - 8.53% | 9 | $73,710 |
Kansas | 3.1 - 5.7% | 2 | $30,000 (S) - $60,000 (M) |
Kentucky | 2.0 - 6.0% | 6 | $75,000 |
Louisiana | 2.0 - 6.0% | 3 | $50,000 (S) - $100,000 (M) |
Maine | 5.80 - 7.15% | 3 | $51,700 (S) - $103,400 (M) |
Maryland | 2.0 - 5.75% | 8 | $250,000 (S) - $300,000 (M) |
Massachusetts | 5.05% | 1 | Flat Rate |
Michigan | 4.25% | 1 | Flat Rate |
Minnesota | 5.35 - 9.85% | 3 | $161,720 (S) - $273,150 (M) |
Mississippi | 3.0 - 5.0% | 3 | $10,000 |
Missouri | 1.5 - 5.40% | 10 | $8,424 |
Montana | 1.0 - 6.9% | 7 | $18,400 |
Nebraska | 2.46 - 6.84% | 4 | $31,160 (S) - $62,320 (M) |
Nevada | None | ||
New Hampshire | 5.0% | Dividend and Interest Income Only | |
New Jersey | 1.40 - 10.75% | 8 | $5,000,000 |
New Mexico | 1.7 - 4.9% | 4 | $16,000 (S) - $24,000 (M) |
New York | 4.00 - 8.82% | 8 | $1,077,550 (S) - $2,155,350 (M) |
North Carolina | 5.25% | 1 | Flat Rate |
North Dakota | 1.10 - 2.90% | 5 | $433,200 (S) - $433,200 (M) |
Ohio | 0.495 - 4.997% | 9 | $217,400 |
Oklahoma | 0.50 - 5.00% | 6 | $7,200 (S) - $12,000 (M) |
Oregon | 5.0 - 9.9% | 4 | $125,000 (S) - $250,000 (M) |
Pennsylvania | 3.07% | 1 | Flat Rate |
Rhode Island | 3.75 - 5.99 | 3 | $145,600 |
South Carolina | 0.0 - 7.0% | 6 | $15,400 |
South Dakota | None | ||
Tennessee | 2.0% | Dividend and Interest Income Only | |
Texas | None | ||
Utah | 4.95% | 1 | Flat Rate |
Vermont | 3.35 - 8.75% | 4 | $200,100 (S) - $243,650 (M) |
Virginia | 2.00 - 5.75% | 4 | $17,000 |
Washington | None | ||
West Virginia | 3.0 - 6.5% | 5 | $60,000 |
Wisconsin | 4.00 - 7.65% | 4 | $258,950 (S) - $345,270 (M) |
Wyoming | None | ||
District of Columbia | 4.00 - 8.95% | 6 | $1,000,000 |
Note: S = Single Filers, M = Married Filing Jointly, else one set of income brackets applies.
About the Author - 2021 State Income Tax Rates
