Nine states have no income tax at all

Nine U.S. states collect no income tax from residents: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception — it taxes only dividend and interest income, not wages. If you live in or are moving to one of these states, you will not owe state income tax on your salary, self-employment income, or most investment gains.

The other 41 states and Washington, D.C. all tax income in some form. The rates, brackets, and what counts as taxable income vary widely. Some states tax only wages; others tax capital gains differently than wages; a few have flat taxes that explore the same rate to everyone. Understanding which category your state falls into matters for tax planning and knowing what forms you will need to file.

Key Takeaways

  • Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax; New Hampshire taxes only investment income, not wages.
  • The remaining 41 states and Washington, D.C. all tax income, but the rates and brackets differ — some as low as 1% and others above 10%.
  • Some states tax capital gains at a different rate than wages, and a few states have recently changed their tax structure, so checking your state's current rules is important.
  • Your state of residence on January 1 of the tax year determines which state tax return you file, even if you move later in the year.

States with graduated income tax brackets

Most states that tax income use a graduated bracket system, meaning the tax rate increases as your income rises. For example, you might pay 3% on the first $30,000 of income, 5% on the next $40,000, and 7% on anything above that. The brackets and rates are set by each state and change from year to year.

States with graduated brackets include California, New York, Illinois, Ohio, Pennsylvania, and many others. The lowest starting rates are around 1% to 2%, and the highest top rates range from 8% to over 13% depending on the state. You will need to know your state's brackets for the tax year you are filing to calculate your state tax liability or to understand how much state tax your employer should be withholding from your paycheck.

States with flat income tax rates

A smaller group of states use a flat tax, meaning everyone pays the same percentage regardless of income level. Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Mississippi, Missouri, Montana, North Carolina, Pennsylvania, and Utah all use flat rates. These rates range from about 2% to 5.75% depending on the state.

A flat tax is simpler to calculate than a graduated system, but it does not mean you pay less — a 5% flat tax can result in a higher bill than a graduated system in a neighboring state. Flat-tax states are worth noting if you are comparing the overall tax burden of moving to a different location.

States that tax capital gains differently

Several states have recently created separate tax rates for long-term capital gains — the profit you make when you sell an investment you have held for more than a year. California, New York, and Washington all tax capital gains at higher rates than ordinary income, or in Washington's case, at a special capital gains tax rate. These rules are relatively new and have been subject to legal challenges, so the details change.

If you have significant investment income or are planning to sell property or securities, check whether your state taxes capital gains separately. The difference can be substantial, especially for large gains. Your state's department of revenue website will have the current rules and rates.

How to find your state's current tax rate and brackets

Each state publishes its tax brackets and rates on its department of revenue website. You can search "[your state] department of revenue" or "[your state] income tax brackets" to find the official page. The IRS also maintains a list of state tax agencies with links to each one.

Tax brackets change every year, usually in January, so it is important to check the current year's brackets rather than relying on what you paid last year. If you use tax software or work with a tax preparer, they will use the correct brackets automatically. If you are calculating your state tax by hand or estimating what you owe, pull the current-year brackets from your state's official source.

What happens if you move during the tax year

Your state of residence on January 1 of the tax year determines which state you file a return in, even if you move on January 2. However, if you move partway through the year, some states require you to file a part-year resident return showing income earned in each state separately. The state you move to may also require a return for the portion of the year you lived there.

If you are planning a move, ask the tax authority in both your current state and your destination state whether you will owe returns in both places. Some states have reciprocal agreements that prevent you from being taxed twice on the same income, but others do not. Getting this right before you file can save you from penalties or having to file an amended return.

States with special taxes on specific types of income

Beyond income tax, some states tax specific types of income separately. Tennessee and New Hampshire tax dividend and interest income but not wages. Vermont taxes only income from Vermont sources. A few states have inheritance or estate taxes that explore when someone passes away, which is different from income tax but affects your overall state tax picture.

If you receive income from multiple sources — wages, self-employment, rental property, investments — check whether your state taxes each type the same way. Some states exempt certain types of income entirely, such as military pensions or retirement distributions, which can make a real difference in your tax bill.

Frequently Asked Questions

Do I have to file a state return if I live in a no-income-tax state?

No. If you live in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming and have no other state tax obligation, you do not file a state return. New Hampshire residents do not file unless they have dividend or interest income above a certain threshold. However, if you earned income in a different state, you may owe a return to that state.

What if I work in one state but live in another?

You generally file a return in the state where you live and claim a credit for taxes paid to the state where you worked. Some states have reciprocal agreements that let you avoid filing in the work state altogether. Check both your home state and work state's rules, as they vary.

Are federal income tax and state income tax the same thing?

No. Federal income tax goes to the U.S. government and is required in all states. State income tax goes to your state government and is required only in states that have an income tax. You file separate returns for each — a federal Form 1040 and your state's income tax form.

If I move to a no-income-tax state, do I stop paying state tax when ready?

You stop owing state income tax once you establish residency in a no-income-tax state, but the timing depends on when you move and your state's residency rules. If you move partway through the year, you may owe a part-year return to your old state for the months you lived there. File that return to avoid penalties.

Can my state tax income I earned before I moved there?

No. Your state can only tax income you earned while you were a resident. If you move away, your old state cannot tax income you earn after you leave. However, if you moved partway through the year, you owe tax on income earned before you left.