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Takeaway
State income taxes are a tax enforced by a state’s government that apply to any money earned in — and sometimes outside — a certain state. These taxes affect most individuals and organizations, and failing to file accurately and on time can spur consequences like fines, audits and other costly penalties. Read how state income taxes work, how they’re calculated and the individual rates for 2024 in each state that maintains them.
The federal government isn’t the only authority that requires payroll taxes.
In fact, a company must adhere to an income tax law — or several — for every state where it operates. While many may rely on a precedent set by federal regulations, some rely on their own unique tax structures. While potentially difficult to manage, state income taxes are vital to fund:
- health care programs
- public and higher education
- maintenance of roads, highways and other forms of transportation
- and other vital services and initiatives
But with so many potential taxes, it can be hard to identify and verify the laws that affect your organization. Luckily, we’ll help you understand what state income tax is, how to calculate it and the specific income tax rates for each state.
What is state income tax?
A state income tax is a tax enforced by a state’s government on income earned in (and sometimes from) the state. Certain laws may be specific to money earned specifically in that state, while others may place a tax on income generated from anywhere.
Additionally, individuals and organizations have to report this on taxes. Like with federal taxes, this means companies and taxpayers must file tax returns every year. Failing to pay or report state income taxes timely and accurately can result in:
- fines
- audits
- interest
- and other penalties
Factors affecting state income tax
State income tax doesn’t always depend on flat, static rate. From the different filing statuses to income brackets and more, the total state taxes owed can vary between taxpayers. With this in mind, let’s explore the variables that impact state income taxes.
Annual income
An employee could pay higher (or less) state taxes depending on what they earn each year. For example, certain states may apply more taxes to those with a higher annual income. Some employees may even be exempt from a state tax outright if their income falls below a certain threshold.
Filing statuses
The four primary filing statuses can have a significant impact on an employee’s overall tax burden. Keep the following in mind.
Single filing
According to the IRS, the single filing status is typically used for taxpayers who are unmarried, divorced or legally separated. In most cases, an individual who identifies as single must file a tax return.
Married filing separately
Married taxpayers have the option to file their tax returns independently. Potentially, this could reduce the total tax burden two people would have if they filed jointly. For example, one spouse may be a small business owner who would benefit from a separate filing due to a potential tax credit or other incentive.
Married filing jointly
Alternatively, married taxpayers may file their returns together. If the couple files together, both must ensure their returns include their combined:
- income
- deductions
- credits
A spouse may also file jointly even if they had no income the previous year. Generally, the IRS recommends married taxpayers complete joint and separate returns to determine which route yields the lower combined tax.
Head of household
To qualify as a head of household, an individual must pay over one-half of the cost of maintaining a home for themselves and a dependent. With married taxpayers, this means only one can claim this status. In most cases, those filing as head of household can claim a larger deduction than the single status.
Exemptions
Taxpayers with an exemption may omit all or certain income from their filing. Both organizations — like some charities or nonprofits — and individuals may qualify for a tax exemption.
Keep in mind an exemption isn’t a deduction. Rather, it completely lowers the amount that can be taxed, meaning a percentage-based tax will be derived from the post-exemption amount.
Tax deductions
Deductions reduce a taxpayer’s taxable income based on status, hardship, inflation and more. Deductions tend to take one of two forms:
- Standard deduction or a categorical deduction that combines the basic deduction with any additional deductions for age or disability.
- Itemized deductions or a list of deductions that a taxpayer may be required to provide through a Schedule A (Form 1040).
In most cases, a standard deduction offers a simpler route. However, some taxpayers may be required to provide an itemized deduction, such as if someone is filing on behalf of an estate or trust.
Tax credits
A tax credit reduces the income tax an individual or organization owes. Refundable tax credits can increase a tax return, whereas nonrefundable tax credits don’t convert to a return after they help completely reduce any owed taxes.
Which states have income tax?
Nearly every state maintains an income tax — save eight. They are:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Similarly, New Hampshire doesn’t apply a tax to any earned wages. In these cases, states may generate revenue through other taxes, such as for sales or property.
How to calculate state income tax in 2024
In most cases, taxpayers should consult a licensed tax professional and use their state’s income tax calculator to help confirm their eligibility. Even so, income tax is influenced by three primary factors:
- taxable income
- a state’s effective tax rate
- a state’s marginal tax rate
A marginal tax rate aligns with the highest income bracket a taxpayer reaches. An effective tax rate, on the other hand, is the actual percentage an employee pays on their entire taxable income. (Remember, one’s income may fall into more than one bracket, so the marginal tax rate can’t always be used to accurately calculate tax liability.)
For most Americans, advisors recommend taxpayers rely on their state’s effective tax rate to prepare for filing. But those in a higher income bracket should generally rely on the marginal tax rate for planning.
Regardless, taxpayers should consult their local government’s site to verify the income taxes that apply to their unique situation.
When to file state income taxes in 2024
When income taxes are due varies among the states that collect them. For most, taxpayers must file their state tax returns for 2023 by April 18. (The federal tax deadline, on the other hand, is April 15.) Keep the following information in mind for states with less common due dates:
| State | Due date for 2023 taxes |
| Colorado | April 15 |
| Delaware | May 2 |
| Hawaii | April 20 |
| Iowa | May 2 |
| Louisiana | May 15 |
| Maine | April 19 |
| Maryland | April 15 |
| Massachusetts | April 19 |
| Minnesota | April 15 |
| Mississippi | April 15 |
| Nebraska | April 15 |
| New Hampshire | April 15 |
| New Mexico | May 2 |
| North Carolina | April 15 |
| North Dakota | April 15 |
| Oklahoma | April 20 |
| South Carolina | May 2 |
| South Dakota | April 15 |
| Utah | April 20 |
| Virginia | May 1 |
While many of these dates remain consistent, it’s important for taxpayers to regularly verify this date each year to avoid a late or missed filing.
2024 individual income tax rate by state
Excluding those without income tax, no two states share identical rates and brackets. For example, Delaware’s highest taxable income bracket caps off at $60,001, whereas New York considers income up to $25 million annually.
Keep the following rates and brackets in mind for individual taxpayers:
| State | Individual tax rates | Individual minimum and maximum income brackets |
| Alabama | 2%-5% | $0-$3,000 |
| Arizona | 2.5% | Flat rate |
| Arkansas | 4%-4.4% | $0-$8,000 |
| California | 1%-13.30% | $0-$1,000,000 |
| Colorado | 4.4% | Flat rate |
| Connecticut | 2%-6.99% | $0-$500,000 |
| Delaware | 2.2%-6.6% | $2,000-$60,000 |
| Georgia | 5.49% | Flat rate |
| Hawaii | 1.4%-11% | $0-$200,000 |
| Idaho | 5.8% | Flat rate |
| Illinois | 4.95% | Flat rate |
| Indiana | 3.05% | Flat rate |
| Iowa | 4.4%-5.7% | $0-$62,100 |
| Kansas | 3.1%-5.7% | $0-$30,000 |
| Kentucky | 4% | Flat rate |
| Louisiana | 1.85%-4.25% | $0-$50,000 |
| Maine | 5.8%-7.15% | $0-$61,600 |
| Maryland | 2%-5.75% | $0-$250,000 |
| Massachusetts | 5%-9% | $0-$1,000,000 |
| Michigan | 4.25% | Flat rate |
| Minnesota | 5.35%-9.85% | $0-$193,240 |
| Mississippi | 4.7% | Flat rate |
| Missouri | 2%-4.8% | $1,273-$8,911 |
| Montana | 4.7%-5.9% | $0-$20,500 |
| Nebraska | 2.46%-5.84% | $0-$35,730 |
| New Jersey | 1.4%-10.75% | $0-$1,000,000 |
| New Mexico | 1.7%-5.9% | $0-$210,000 |
| New York | 4%-10.9% | $0-$25,000,000 |
| North Carolina | 4.5% | Flat rate |
| North Dakota | 1.95%-2.5% | $44,725-$225,975 |
| Ohio | 2.75%-3.5% | $26,050-$92,150 |
| Oklahoma | 0.25%-4.75% | $0-$7,200 |
| Oregon | 4.75%-9.9% | $0-$7,200 |
| Pennsylvania | 3.07% | Flat rate |
| Rhode Island | 3.75%-5.99% | $0-$176,050 |
| South Carolina | 0.0%-6.4% | $0-$17,330 |
| Utah | 4.65% | Flat rate |
| Vermont | 3.35%-8.75% | $0-$229,550 |
| Virginia | 2%-5.75% | $0-$17,000 |
| Washington, D.C. | 4%-10.75% | $0-$1,000,000 |
| West Virginia | 2.36%-5.12% | $0-$60,000 |
| Wisconsin | 3.5%-7.65% | $0-$315,310 |
Remember, it’s best practice to consult a licensed tax professional about any potential credits or deductions or simply to verify a state’s specific tax rate.
Explore Paycom’s resources to learn more about payroll taxes, compliance and more.