🇺🇸 State Tax Rules in the USA: Complete Guide for All Taxpayers (2025 Update)
State taxes in the United States vary widely and can be very different from federal taxes. Every state creates its own rules for income tax, property tax, sales tax, and other state-level taxes. Some states have no income tax, while others have progressive tax brackets similar to the federal system.
This guide explains how state taxes work, who must file, how states calculate income tax, and where to find official information.
🏛️ What Are State Taxes?
State taxes are taxes collected by individual U.S. states to fund:
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Education
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Roads and public transportation
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Health services
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Police and fire departments
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State welfare programs
Each state sets its own tax laws. Therefore, your tax bill depends on where you live or earn income.
✔ Federal tax = applies everywhere in the U.S.
✔ State tax = depends on your state
📌 Do All States Have Income Tax?
No. As of recent years, 9 states do NOT collect personal income tax.
States With No State Income Tax
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Alaska
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Florida
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Nevada
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South Dakota
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Texas
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Washington
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Wyoming
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Tennessee (wages not taxed; only interest/dividends taxed)
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New Hampshire (similar rule—no tax on wages)
(Reference: State income tax overview – )
If you live in one of these states, you do not file a state income tax return for wages.
📌 States That DO Have Income Tax
41 states and D.C. tax income. (Reference: U.S. state income tax federal-linking system – )
These states generally follow one of two systems:
1️⃣ Progressive Tax System
You pay higher tax rates as your income increases.
Examples: California, New York, New Jersey.
2️⃣ Flat Tax System
You pay one single tax rate on all taxable income.
Examples: Colorado, Illinois, Utah.
Many states begin their calculations with your federal adjusted gross income (AGI) and then add or subtract adjustments based on state rules.
🧾 Who Must File a State Income Tax Return?
You must file if:
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You live in a state with income tax
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You earn income in that state (even if you live elsewhere)
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You worked multiple jobs or moved states during the year
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You are claimed as a dependent but earned enough income
States have different filing thresholds. Some require filing even with low income.
📤 What Types of Income Are Taxed by States?
Most states tax:
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Wages (W-2)
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Interest and dividends
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Business income
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Rental property income
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Gains from selling assets
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Some retirement income
A few states:
✔ Do not tax Social Security income
✔ Do not tax pensions or retirement withdrawals
✔ Offer special senior citizen deductions or credits
Check your state’s Department of Revenue for exact rules.
📉 What Deductions and Credits Do States Offer?
States offer many benefits that reduce your tax bill:
Common State Deductions
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Standard deduction
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Itemized deductions (varies)
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Retirement income exclusions
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Homeowner deductions
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School or college expense deductions
Common State Credits
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Earned Income Tax Credit (EITC)
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Child Tax Credit
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Property tax credit
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Energy or solar credits
Some states automatically “conform” to IRS rules. Others create their own systems.
(Reference: Many states link their tax systems to federal income tax rules – )
🏙️ Local Taxes (City, County)
In addition to state taxes, some cities or counties charge their own income taxes.
Examples:
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New York City
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Philadelphia
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Detroit
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Some counties in Ohio and Kentucky
This means you may owe state + local taxes depending on where you live or work.
🔄 What If You Work in More Than One State?
This is common for remote workers, traveling employees, or people who moved states.
You may have to:
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File a resident return in your home state
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File a non-resident return in the state where you earned money
Many states offer tax credits to avoid double-taxation.
🏠 What If You Move to a New State?
If you moved mid-year, you typically file a part-year resident return in each state.
Your income is split based on:
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Where you lived
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Where you worked
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State residency rules
📚 Where to Check Official State Tax Rules (Government Websites)
Here is the safest way to find state tax laws:
✔ U.S. State Tax Agencies Directory
Official IRS List of All State Revenue Departments:
https://www.irs.gov/businesses/small-businesses-self-employed/state-government-websites
(This link is safe, official, and directly provided by the IRS.)
✔ U.S. State Tax Rate Summary
State income tax overview:
These government-linked sources provide:
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State tax rates
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Filing forms
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Payment deadlines
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Deductions and credits
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Online filing options
🧮 Important: State Taxes Are Separate From Federal Taxes
Many people think filing federal taxes covers everything — but it doesn’t.
Federal taxes include:
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Income tax
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Social Security & Medicare taxes
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Federal unemployment
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ACA/health-related tax credits
State taxes may include:
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Income tax
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Property tax
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Sales tax
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Local city/county taxes
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Special taxes (e.g., excise, luxury, environmental)
🕒 When Are State Taxes Due?
Most states follow the April 15 deadline, like the IRS.
Some states have different filing dates — always check your state’s official website.
✔️ Key Takeaways
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State tax rules vary greatly across the U.S.
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9 states have no state income tax
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41 states + D.C. do tax income
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States use progressive or flat tax systems
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You may need to file in multiple states depending on where you live/work
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Official state revenue websites (via IRS directory) are the best source of information