Selected State Income Tax Structures

States with no income tax

Nine states impose no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. New Hampshire and Washington tax only certain investment or capital gains income, not wages. For high earners, relocating to a no-income-tax state can save tens of thousands of dollars annually.

However, no-income-tax states often compensate with higher sales taxes, property taxes, or fees. Texas, for example, has no income tax but one of the highest effective property tax rates in the country. Washington relies heavily on its sales tax, which at 6.5% (before local additions) impacts lower-income residents disproportionately.

Flat tax vs. progressive state systems

Among states that do tax income, the structures vary widely. Some use a flat rate: Illinois charges a flat 4.95%, while Colorado uses a flat 4.4%. Others use progressive brackets similar to the federal system. California tops the scale with a marginal rate reaching 13.3% on income above $1 million, the highest state income tax rate in the nation.

Flat and progressive systems differ in their published rate structures. A flat-rate schedule applies one stated rate, while a progressive schedule applies multiple published thresholds and rates. This reference does not model individual filing outcomes or tax-planning strategies.

The SALT deduction and federal interaction

State and local tax (SALT) deductions allow eligible itemizing taxpayers to deduct state income, property, and sales taxes from federal taxable income. For 2026, the limit is $40,400 ($20,200 for married filing separately), subject to an income-based phaseout that does not reduce the limit below $10,000.

For taxpayers in states with high income and property taxes, the SALT cap means state taxes effectively cost more on an after-federal-tax basis. This interaction between federal and state tax policy is one of the most important factors in evaluating total tax burden.

Read our detailed guide on the SALT deduction limit for current-year rules and sources.

Total tax burden: looking beyond income tax

Comparing states by income tax alone is misleading. A complete picture requires evaluating income tax, sales tax, property tax, excise taxes, and various fees. According to the Tax Foundation, the states with the highest combined state and local tax burden include New York, Connecticut, and New Jersey, while Alaska, Wyoming, and Tennessee rank among the lowest.

State treatment of Social Security benefits and pension income differs. Some states fully exempt Social Security, while others tax it partially or fully; the cited state authority and applicable tax-year rules govern individual cases.