2025 State Income Tax Rates Explained: Compare by State, Brackets & Filing Tips

Confused about how much you’ll owe in state income taxes this year? You’re not alone. With rates, brackets, and laws varying from one state to another — and changing every year — it’s easy to miss something important. This guide from InvestoDock breaks down the 2025 state income tax rates, who pays what, and why it matters. Whether you’re a remote worker, a business owner, or just trying to file correctly, you’ll walk away with clear answers and tools to help you save money and avoid surprises.

What Is State Income Tax?

Back when I filed my first tax return, I thought I had everything figured out. I knew about federal income tax, thanks to all the W-2s and YouTube explainers I watched. But then came this unfamiliar line: “state income tax withheld.” That moment sent me down a rabbit hole I didn’t expect — and that’s when I realized: federal taxes are just half the story.

State income tax is a separate tax collected by individual U.S. states on the income you earn. While the federal government taxes everyone using the same rules across the country, each state makes its own decisions about how to handle income tax. Some states like Florida, Texas, and Washington don’t charge any state income tax at all — and yes, people do move there just for that reason.

But for states that do collect it, the 2025 state income tax rates vary wildly. Some charge a flat rate (like Colorado’s 4.4%), while others use a progressive system based on income brackets — meaning the more you earn, the higher your rate. This is what drives all those questions about how state income tax works and why income tax rates by state are such a hot topic during election years.

So where does that money go? In most states, the revenue funds public schools, highways, health care, law enforcement, and even disaster relief programs. It’s what keeps the lights on at the local level. And while no one loves paying taxes, it’s easier to stomach when you know it’s fixing potholes and paying teachers.

Types of State Income Tax Systems

One of the most confusing things when I moved between states for work was trying to figure out how state income tax would affect my paycheck. Turns out, not all states play by the same rules — some charge a flat rate, others tax progressively, and a few don’t tax income at all. Understanding these systems is key to knowing how state income tax works and how much you’ll actually take home.

Flat Tax States

In a flat tax system, everyone pays the same percentage of their income, regardless of how much they earn. It’s simple and predictable, which is why it’s appealing to many. States like Colorado (4.4%) and Illinois (4.95%) use this approach. Whether you make $30,000 or $300,000, the rate stays the same.

Progressive Tax States

On the flip side, progressive tax states use income brackets to determine your rate. The more you earn, the higher your rate climbs. This is meant to be fairer, but it does add complexity. Take California, where the rates range from 1% to 13.3% — or New York with rates from 4% to 10.9%. These systems adjust to income levels, but they can catch you off guard if your salary suddenly jumps.

No Income Tax States

Then there are the dream states for some people — those with no income tax at all. Texas, Florida, and Tennessee fall into this category. You keep more of your paycheck, but these states often make up for it with higher sales or property taxes.

Watch also: How to Avoid Capital Gains Tax When Selling Your Home: Full Guide for Homeowners

2025 Income Tax Rates by State

Understanding how income tax rates by state differ in 2025 can help you make smarter decisions—especially if you’re moving, changing jobs, or planning your finances. Below is an alphabetical list of all 50 states and Washington D.C., along with their current state income tax rates, the type of tax system each uses, and any notable changes that have taken place this year.

Sources: Data compiled from the Tax Foundation and official state tax department websites.

Which States Have No Income Tax?

Let’s talk about the lucky nine. As of 2025, these are the states where residents pay no state income tax on wages or salaries:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

So how do these states pay the bills without taxing your paycheck? They lean on other revenue streams. For example, Florida and Nevada generate significant income from tourism taxes. Texas relies heavily on property taxes and business taxes. Washington recently introduced a capital gains tax on high earners.

In short, while you’re saving on state income tax, you might still feel the pinch through higher sales taxes, excise taxes, or fees. Just because it’s income-tax-free doesn’t mean it’s tax-free overall — it just means the system works a little differently.

States With the Highest and Lowest Tax Rates

Not all state income tax rates are created equal. In fact, the difference between the top and bottom can be thousands of dollars per year, depending on how much you earn. Here’s a snapshot of the five states with the highest and lowest top marginal tax rates in 2025.

Top 5 Highest Taxed States

• California: 13.3% – The highest in the country, aimed at top earners.
• New York: 10.9% – Includes both state and city surcharges.
• New Jersey: 10.75% – Affects incomes above $1 million.
• Hawaii: 11% – Kicks in at relatively lower income thresholds.
• District of Columbia: 10.75% – Applies to incomes over $1 million.

Top 5 Lowest Taxed States (Excluding No-Tax States)

• North Dakota: 2.5%
• Indiana: 3%
• Pennsylvania: 3.07%
• Michigan: 4.25%
• Colorado: 4.4%

Keep in mind, these figures refer to top marginal rates, which apply to the highest bracket of income. If your earnings fall into a lower bracket, you’ll pay a lower rate. Also, some states use a flat tax system, meaning the same rate applies no matter how much you make — which can be good or bad depending on your situation.

How State Tax Brackets Work

If you’ve ever looked at your paycheck and wondered why the state took more than you expected — you’re not alone. That’s where progressive tax brackets come in. Most states with an income tax don’t charge one flat rate; instead, they use a tiered system based on your earnings.

In a progressive system, your income is taxed in chunks. Each chunk fits into a bracket, and only that portion is taxed at the corresponding rate. It’s not “all or nothing” — meaning if you move into a higher tax bracket, only the money above that threshold gets taxed more.

Example: Low vs High Income

• Sarah earns $30,000 annually in a state with brackets of:
  • 0% on the first $10,000
  • 5% on income between $10,001 and $30,000
  She pays: (0% × $10,000) + (5% × $20,000) = $1,000 total in state income tax.
• James earns $100,000 in the same state. His brackets are:
  • 0% on the first $10,000
  • 5% on $10,001 to $30,000
  • 7% on $30,001 to $100,000
  He pays:
  (0% × $10,000) = $0
  (5% × $20,000) = $1,000
  (7% × $70,000) = $4,900
  Total = $5,900

So, even though James is in a higher bracket, only the income above $30,000 gets taxed at 7%. That’s the beauty (and confusion) of how state income tax works.

Filing State Tax Returns

Filing your state income tax return doesn’t have to be a headache — if you know what to expect. Just like the IRS handles federal taxes, each state has its own tax agency and rules for when and how to file. Most states use April 15 as the deadline, but there are exceptions, especially for states that don’t collect income tax.

Generally, if you earned income in a state that collects tax, you’re required to file a return there — even if it’s not your home state. Many states allow e-filing directly through their tax department’s website or through tax software like TurboTax or H&R Block.

State Filing Deadlines (Sample – 2025)

What If You Live and Work in Different States?

It gets tricky when your home and job aren’t in the same state. You may need to file two returns:

• Resident Return – For the state you live in
• Nonresident Return – For the state where you worked

But don’t worry — many states have reciprocity agreements, which means you won’t be taxed twice on the same income. Just be sure to keep your W-2 forms organized and check with your employer about where they withhold taxes from.

Key Changes in 2025

Every year brings tax changes, and 2025 state income tax rates are no exception. Whether it’s a new tax bracket or an unexpected surcharge, knowing what’s different this year can save you a lot of hassle — and money.

One of the biggest updates comes from Washington state, which now enforces a 7% long-term capital gains tax on profits above the standard deduction. If your capital gains exceed $1 million, you’re looking at an additional 2.9% surtax on the overage.

Other notable adjustments include:

• Georgia adopted a flat tax model at 5.39%, simplifying its previous progressive system.
• Iowa implemented a flat tax of 3.8% as part of ongoing reforms to reduce complexity.
• Mississippi eliminated lower brackets, consolidating to a flat 4.4% tax.

States like California and New York have kept their high top marginal rates intact, but inflation adjustments have shifted bracket thresholds slightly. Be sure to check your specific bracket — especially if your income changed.

Filers should also note that more states are requiring online submissions and offering fewer paper forms. Always use your state’s official tax portal or trusted software to stay compliant.

Bottom line? Stay informed. A small rate tweak or system shift could affect your refund or what you owe.

Watch also: How to Find the Best Tax Preparer Near You: Expert Tips, Red Flags, and What to Expect

Resources & Tools

Navigating state income tax can get overwhelming — but you don’t have to do it alone. Below are trusted resources to help you file accurately and stay up to date:

• IRS.gov – Official federal tax guidance
• Tax Foundation – State-by-state tax comparisons and policy insights
• State Tax Agencies – Direct links to every state’s tax department
• SmartAsset Tax Calculator – Estimate your taxes by state and income level
• TurboTax Tools – Refund estimators, checklists, and more

No matter which state you live or work in, it’s a good idea to visit your local tax authority’s website. They often have state-specific FAQs, forms, and live chat help. Don’t wait until April — start now and get ahead.

Conclusion

State income tax laws can vary widely, and the updates for 2025 only highlight how important it is to stay informed. From understanding income tax rates by state to navigating progressive brackets or no-tax states, knowing where you stand helps you plan smarter.

Whether you’re filing in one state or multiple, take advantage of online calculators, your state’s tax portal, or professional help. A CPA can make a big difference if your situation is complex — especially if you moved, worked remotely, or crossed state lines.

Taxes aren’t fun, but getting them right? Totally worth it. Stay organized, file on time, and always double-check the latest rules in your state.

Frequently Asked Questions

Do I have to pay taxes in two states?

Yes, you might have to — but it depends. If you live in one state and work in another, you’ll typically file a resident return in your home state and a nonresident return in the state where you earned income. However, many states have reciprocity agreements that prevent double taxation. Check both states’ rules to avoid overpaying.

How do I file taxes if I worked remotely from another state?

If you worked remotely from a different state than your employer’s location, you may need to file in both states. Your tax liability depends on where the work was physically performed. Some states are more aggressive in taxing remote workers, so verify with your state’s tax agency to ensure compliance.

Can I deduct state income taxes on my federal return?

Yes, you can — but with limits. The IRS allows you to deduct either state income tax or sales tax on your federal return, as part of the itemized deductions. However, the total deduction for state and local taxes (SALT) is capped at $10,000 for most filers under current federal law.

What if I moved mid-year?

If you changed your residency during the year, you may need to file part-year returns in both states. You’ll report the income earned while you were a resident in each state. Be sure to keep documentation showing when you moved and where you earned income.

Are all income types taxed equally by states?

No. Some states tax wages but exempt Social Security or pension income. Others have special rules for capital gains, dividends, or freelance income. Always check your state’s official tax guidelines for income-specific rules.

What state has the highest taxes in 2025?

California has the highest top marginal state income tax rate in 2025 at 13.3%. This applies to high-income earners, particularly individuals making over $1 million. When combined with local taxes, California’s total tax burden can be the steepest in the nation.

What is the state and local tax deduction for 2025?

The State and Local Tax (SALT) deduction for 2025 remains capped at $10,000 for individuals and married couples filing jointly. This means you can deduct up to $10,000 in combined state income, property, and sales taxes on your federal return if you itemize.

What is the maximum taxable income in 2025?

There is no universal “maximum taxable income” across all states — each sets its own brackets. However, for federal purposes in 2025, the top marginal tax rate of 37% kicks in for individuals earning above approximately $609,350. States like California and New York apply their top rates at much lower thresholds.

What state has the lowest tax burden in 2025?

Wyoming consistently ranks as the state with the lowest overall tax burden in 2025. It has no state income tax, low property taxes, and no corporate or estate tax. Other low-tax states include Alaska and South Dakota.