{"id":2068,"date":"2025-08-03T04:51:41","date_gmt":"2025-08-03T04:51:41","guid":{"rendered":"http:\/\/ft365.org\/index.php\/2025\/08\/03\/5-states-with-the-highest-income-tax-rates-and-5-with-the-lowest-bankrate\/"},"modified":"2025-08-03T04:51:41","modified_gmt":"2025-08-03T04:51:41","slug":"5-states-with-the-highest-income-tax-rates-and-5-with-the-lowest-bankrate","status":"publish","type":"post","link":"https:\/\/ft365.org\/index.php\/2025\/08\/03\/5-states-with-the-highest-income-tax-rates-and-5-with-the-lowest-bankrate\/","title":{"rendered":"5 States With The Highest Income Tax Rates \u2014 And 5 With The Lowest | Bankrate"},"content":{"rendered":"
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It\u2019s understandable to feel envious of people who live in states with low or no income taxes. After all, after paying federal taxes, state income taxes take another swipe at your bottom line.<\/p>\n

But if you\u2019re comparing places to live, look at the big picture and consider other local taxes, experts say. Because if state income taxes are really low, you\u2019re likely paying higher property or sales taxes to compensate for that.<\/p>\n

\u201cWashington State famously has no income tax, but high sales tax, and Oregon is the opposite. So you want to look at the whole picture,\u201d says Heather Liston, a certified financial planner, enrolled agent and principal at Clarity Financial in San Francisco.<\/p>\n

States with the highest income tax rates<\/h2>\n

That said, there are some states where income taxes take a much bigger bite out of residents\u2019 earnings. The states with the highest tax rates are as follows. <\/p>\n

Keep in mind that some states use a graduated, or progressive, tax system \u2014 where income is bunched into chunks, each of which is taxed at a different rate. This list focuses on each state\u2019s highest tax rate, also called the marginal tax rate.<\/p>\n

\n\n\n\n\n\n\n\n\n\n
States with the highest tax rates<\/th>\nTop tax rate<\/th>\n<\/tr>\n<\/thead>\n
California<\/td>\n13.3%<\/td>\n<\/tr>\n
Hawaii<\/td>\n11%<\/td>\n<\/tr>\n
New York<\/td>\n10.9%<\/td>\n<\/tr>\n
New Jersey, Washington D.C.<\/td>\n10.75%<\/td>\n<\/tr>\n
Oregon<\/td>\n9.9%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>
Sources: State tax websites. All rates are for 2025 unless unavailable, in which case 2024 rates are shown. <\/em> Note: California\u2019s top rate is 12.3% but the state adds a 1% mental health service tax on income of $1 million+.<\/em><\/figcaption>

All of the states (and Washington D.C.) in the list above have graduated, aka progressive, tax systems. In a progressive tax system, your marginal tax rate is the top rate you pay, but your effective, or actual, tax rate is a blend of rates, and is generally lower than your marginal rate.<\/p>\n

Note that a state\u2019s top tax rate often only affects the people who make the highest taxable incomes.<\/p>\n

\u201cPeople will think of California, for example, and their highest tax rate is much higher than the average around the country. But that\u2019s for high income,\u201d says Alyssum Malone, a CFP\u00ae and senior wealth advisor with Focus Partners Wealth in Colorado Springs, Colo.<\/p>\n

Here are two examples of how California\u2019s current tax rates apply to specific situations:<\/p>\n

    \n
  • A married couple that files jointly with $125,000 in taxable income pays a top rate of 8 percent.<\/li>\n
  • A single person with $40,000 in taxable income pays a top rate of 4 percent.<\/li>\n<\/ul>\n

    And portions of income for all taxpayers in California are taxed at 1 percent and 2 percent. In fact, California has a total of nine different tax brackets. That\u2019s the nature of a progressive tax system: Your income is separated into different chunks, each of which is taxed at a different rate. <\/p>\n

    And California\u2019s 12.3 percent rate?<\/p>\n

      \n
    • For a married couple filing jointly, that 12.3% rate applies solely to income above $1,442,628 in 2024.<\/li>\n
    • For a single filer, the 12.3 percent applies to income above $721,314 in 2024.<\/li>\n<\/ul>\n

      States with the lowest income tax rates<\/h2>\n

      At the other end of the tax spectrum, nine states have no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. (Washington does tax capital gains income for some high earners.)<\/p>\n

      The states that levy an income tax, but have the lowest rates in the country, are as follows.<\/p>\n

      \n
      \n\n\n\n\n\n\n\n\n\n
      States with the lowest tax rates (among states that levy an income tax)<\/th>\nTop income tax rate<\/th>\n<\/tr>\n<\/thead>\n
      North Dakota, Arizona<\/td>\n2.5%<\/td>\n<\/tr>\n
      Indiana, Louisiana<\/td>\n3%<\/td>\n<\/tr>\n
      Pennsylvania<\/td>\n3.07%<\/td>\n<\/tr>\n
      Ohio<\/td>\n3.5%<\/td>\n<\/tr>\n
      Iowa<\/td>\n3.8%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>
      Sources: State tax websites. All rates are for 2025 unless unavailable, in which case 2024 rates are shown. <\/em><\/figcaption><\/div>\n

      Five of these states have flat tax structures \u2014 Arizona, Indiana, Iowa, Louisiana and Pennsylvania \u2014 while North Dakota and Ohio have a graduated, or progressive tax structure.<\/p>\n

      How states tax income<\/h2>\n

      States tax your income in different ways: Some states have graduated systems, similar to the federal tax system, in which people with low incomes pay lower tax rates and higher earners pay higher ones.<\/p>\n

      Other states employ a flat tax in which the same rate is applied to each taxpayer, regardless of income.<\/p>\n

      And some states have no income tax at all \u2014 often grabbing the attention of Americans interested in holding on to as much of their income as possible.<\/p>\n

      However, states with low or no income taxes often make more of their revenue through sales taxes, property taxes and inheritance taxes, Liston says. For that reason, it\u2019s best to consider a place\u2019s income taxes in context with all the taxes you\u2019ll face when living there.<\/p>\n

      And even then, what you get for those taxes can be drastically different.<\/p>\n

      \u201cI\u2019m in California, which has famously high taxes in basically all those areas \u2014 high income tax, high sales tax, high property tax. But look at how many people choose to live here anyway,\u201d Liston says.<\/p>\n

      \u201cTaxes pay for services that matter to us,\u201d she says. If you move to a state with lower taxes but find that the government and services don\u2019t meet your needs, you might not be happy with that tradeoff, Liston says.<\/p>\n

      Consider the cost of living<\/h2>\n

      Comparing states solely by income tax rates doesn\u2019t necessarily give a fair picture of what you\u2019ll pay in overall taxes if you live there. There\u2019s no free lunch, and states have to pay for services somehow, Malone says.<\/p>\n

      Taxpayers also should consider their earning potential in a particular location to fully understand how a place\u2019s taxes will affect their finances.<\/p>\n

      \u201cMaybe the income that they would make is going to be high enough to overcome a higher tax rate,\u201d Malone says.<\/p>\n

      If you\u2019re a retiree or thinking about where you might want to retire someday, also consider what kind of breaks are available. \u201cA lot of states may have state tax, but then offer tax credits, deductions and incentives for retirees, to motivate retirees to live in the state. So the actual tax they\u2019re going to pay varies from the rate that they\u2019re seeing if they Googled the tax rate,\u201d Malone says.<\/p>\n

      Perhaps a better way to understand how where you live impacts your finances would be to use a cost of living calculator, Malone says.<\/p>\n

      Liston thinks that people often focus too much on taxes, especially when considering where they want to live in retirement.<\/p>\n

      \u201cWhat matters are things like, where do your children and grandchildren live? Where can you get a house with no stairs, or whatever else you need for aging in place? What kind of cultural things do you enjoy?\u201d Liston says. \u201cTax should be the least of it when you think about where you want to live.\u201d<\/p>\n

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      It\u2019s understandable to feel envious of people who live in states with low or no income taxes. After all, after paying federal taxes, state income taxes take another swipe at your bottom line. But if you\u2019re comparing places to live, look at the big picture and consider other local taxes, experts say. Because if state<\/p>\n","protected":false},"author":2,"featured_media":2069,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-2068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-news"],"featured_image_urls":{"full":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates.jpg",1280,720,false],"thumbnail":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-150x150.jpg",150,150,true],"medium":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-300x169.jpg",300,169,true],"medium_large":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-768x432.jpg",640,360,true],"large":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-1024x576.jpg",640,360,true],"1536x1536":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates.jpg",1280,720,false],"2048x2048":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates.jpg",1280,720,false],"morenews-featured":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-1024x576.jpg",1024,576,true],"morenews-large":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-825x575.jpg",825,575,true],"morenews-medium":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-590x410.jpg",590,410,true],"crawlomatic_preview_image":["https:\/\/ft365.org\/wp-content\/uploads\/2025\/08\/2068-Deposits-5-states-with-the-highest-and-lowest-income-tax-rates-260x146.jpg",260,146,true]},"author_info":{"display_name":"henry","author_link":"https:\/\/ft365.org\/index.php\/author\/henry\/"},"category_info":"Latest News<\/a>","tag_info":"Latest News","comment_count":"0","_links":{"self":[{"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts\/2068","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/comments?post=2068"}],"version-history":[{"count":0,"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/posts\/2068\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/media\/2069"}],"wp:attachment":[{"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/media?parent=2068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/categories?post=2068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ft365.org\/index.php\/wp-json\/wp\/v2\/tags?post=2068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}