State Income Taxes Overview

• State income tax is imposed on taxable income of individuals, corporations, and certain estates and trusts. Tax rates vary by state and entity.
• Gross income includes all income earned or received.
• States mainly collect income, sales, and property taxes.

State Income Tax Rates

• 10 states have no income tax.
• Other states use flat or progressive rates.

Taxation of Nonresident Income

• Most states tax nonresident income earned there.
• States cannot tax federal bond income.

State Sales Taxes

• Sales taxes provide revenue for education, healthcare, and transportation.
• Rates vary by state and county.
• California has the highest rate.

Filing State Taxes

• Process for tax preparation can vary from one state to another.
• Rates range from flat percentages to graduated scales based on income.
• Each state has its own set of tax forms and filing procedures.

Filing Taxes When You’ve Lived in Two Different States

• States may have reciprocity agreements.
• Each state has the right to receive tax between the two states.

State Taxes vs. Federal Taxes

• Differences in what income is taxed and how money is collected.
• Taxpayers should understand various levels of taxes to lower overall tax bill.

Interactive State Income Tax Overview

• A total of seven states collect no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.