Each US state can collect its own income tax, but some states do not charge one. Alaska, Nevada, South Dakota, Washington, Texas, Wyoming, and Florida do not collect state taxes. The amount of income tax an individual must pay depends on where they live, and some cities also impose income taxes on their residents.
In the United States, each state is entitled to collect its own income tax. Some states choose to charge an income tax, while others do not. States that do not collect state taxes are Alaska, Nevada, South Dakota, Washington, Texas, Wyoming, and Florida. All other states impose some type of income tax. However, the tax amounts vary with each state.
In some states, income tax is not charged to individuals, but corporations are subject to state taxes; Alaska is an example. However, this state imposes a corporate income tax. Similarly, Florida does not tax individuals, but it does tax corporations. New Hampshire and Tennessee charge a state income tax, but limit it to taxes on interest and dividends.
The amount of income tax an individual must pay depends on where they live. In 2006, Vermont had the highest state income tax, charging more than 9% to its residents. Illinois had the lowest in that same year, charging just 3%. While Illinois collects a flat rate income tax, many states charge a progressive rate. This means that people with higher incomes are taxed at a higher rate.
Typically, individuals are responsible for paying not only state income tax, but also federal income taxes. The combination of both taxes can add up to a considerable sum. For example, if the maximum federal income tax is 35% and a person must pay 9% from the state, he might have to pay up to 44% of his income in taxes. On the other hand, a person living in Texas would not have to pay more than 35%, since that state does not have its own income tax. However, it is worth noting that state income tax is federally deductible.
In addition to federal and state income tax, some cities also impose income taxes on their residents. For example, New York City residents are subject to state and municipal income tax, as well as federal income tax. This can add up to a considerable amount of tax. However, some people live in places that are tax-free from city and state taxes, like Miami, Florida, leaving them to pay only at the federal level.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
