Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all. Some states double their single filer bracket widths for married filers to avoid imposing a “marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation, while many others do not. States’ approaches to income taxes vary in other details as well. Sources: Tax Foundation state tax statutes, forms, and instructions Bloomberg BNA. Note: *Applies to interest and dividends income only. 2021 State Individual Income Tax Structures States with No Income Tax Table 1 shows how each state’s individual income tax is structured.
For example, the top rate kicks in at $1 million or more in California (when the “millionaire’s tax” surcharge is included), as well as in New Jersey, New York, and the District of Columbia.
In other states, the top rate kicks in at a much higher level of marginal income. For example, Georgia’s taxpayers reach the state’s sixth and highest bracket at $7,000 in taxable income. In some states, a large number of brackets are clustered within a narrow income band. Top marginal rates range from North Dakota’s 2.9 percent to California’s 13.3 percent. At the other end of the spectrum, Hawaii has 12 brackets. Kansas, for example, is one of several states imposing a three-bracket income tax system. Conversely, 32 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income. Eight states levy no individual income tax at all. Forty-one tax wage and salary income, while one state-New Hampshire-exclusively taxes dividend and interest income. Their prominence in public policy considerations is further enhanced in that individuals are actively responsible for filing their income taxes, in contrast to the indirect payment of sales and excise taxes.įorty-two states levy individual income taxes.
Individual income taxes are a major source of state government revenue, accounting for 38 percent of state tax collections. Some states double their single-bracket widths for married filers to avoid a “ marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation many others do not. States’ approaches to income taxes vary in other details as well.Hawaii has 12 brackets, the most in the country. Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income.Forty-two states levy individual income taxes.Individual income taxes are a major source of state government revenue, accounting for 38 percent of state tax collections in fiscal year 2018, the latest year of data available.
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