State by State Income Tax Rates for 2020

Technically, the United States has one of the lowest tax rates in the developed world. The average American taxpayer may find that hard to believe, but as costly as the average tax year is for you, things would be much worse if you lived in France, Norway or Sweden. 

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However, this isn’t necessarily true for all American taxpayers because in addition to federal income taxes, which are levied against all citizens, there are also state taxes, sales taxes, and more.

With that in mind, what kind of state income tax rate can you expect to pay, is this going up or down in the near future, and how do your local taxes compare to those being charged in nearby states?

Federal Income Tax Rate for 2020

There are several tax brackets for personal income tax in the United States. These are fixed charges and they are levied against every US citizen in full-time or part-time employment, as well as those earning money through self-employment. These income tax brackets, and the rates charged for 2020, are as follows:

  1. 10% = $0 to $9,875 (Single); $0 to $19,750 (Joint); $0 to $14,100 (Head)
  2. 12% = $9,876 to $40,125 (Single); $19,751 to $80,250 (Joint); $14,101 to $53,700 (Head)
  3. 22% = $40,126 to $85,525 (Single); $80,251 to $171,050 (Joint); $53,701 to $85,500 (Head)
  4. 24% = $85,526 to $163,300 (Single); $171,051 to $326,600 (Joint); $85,501 to $163,300 (Head)
  5. 32% = $163,301 to $207,350 (Single); $326,601 to $414,700 (Joint); $163,301 to $207,350 (Head)
  6. 35% = $207,351 to $518,400 (Single); $414,701 to $622,050 (Joint); $207,351 to $518,400 (Head)
  7. 37% = $518,401+ (Single); $622,051+ (Joint); $518,401+ (Head)

As seen above, you’ll start paying tax when you make more than $9,875 (for Single filers) and if you file alongside a spouse (Joint) or as the Head of a household, the rates change.

State Income Tax

Some states don’t charge any income tax and others charge a flat rate, which is the same across all income tax brackets. Others, however, charge rates that can climb as high as 12% for higher earners. Generally speaking, there are three types of state tax rate: non-existent, fixed for all earners, and progressive (just like federal income tax).

Here is a quick rundown of how those taxes apply across the country:

  • Alabama: 2% to 5% across three income brackets ($500 to $3,001).
  • Alaska: No state income tax is charged.
  • Arizona: 2.59% to 4.54% across 5 income brackets ($10,601 to $158,996).
  • Arkansas: 0.9% to 6.9% across 6 income brackets ($4,299 to $35,100).
  • California: 1% to 12.3% across 9 income brackets ($8,544 to $572,980).
  • Colorado: A flat income rate of 4.63%.
  • Connecticut: 3% to 6.99% across 7 income brackets ($10,000 to $500,000).
  • Delaware: 0% to 6.6% across 7 income brackets ($2,000 to $60,001).
  • District of Columbia: 4% to 8.95% across 5 income brackets ($10,000 to $1,000,000).
  • Florida: No state income tax is charged.
  • Georgia: 1% to 5.75% across 6 income brackets ($750 to $7,001).
  • Hawaii: 1.4% to 11% across 12 income brackets ($2,400 to $200,000).
  • Idaho: 1.125% to 6.925% across 7 income brackets ($1,504 to $11,279).
  • Illinois: A flat income rate of 4.95%.
  • Indiana: A flat income rate of 3.23%.
  • Iowa: 0.33% to 8.53% across 9 income brackets ($1,598 to $71,910).
  • Kansas: 3.1% to 5.7% across 3 income brackets ($15,000-$30,000).
  • Kentucky: A flat income rate of 5%.
  • Louisiana: 2% to 6% across 3 income brackets ($12,500 to $50,001).
  • Maine: 5.8% to 7.15% across 3 income brackets ($21,450 to $50,750).
  • Maryland: 2% to 5.75% across 8 income brackets ($1,000 to $250,000).
  • Massachusetts: A flat income rate of 5.05%.
  • Michigan: A flat income rate of 4.25%.
  • Minnesota: 5.35% to 9.85% across 4 income brackets ($26,520 to $163,890).
  • Mississippi: 3% to 5% across 3 income brackets ($5,000 to $10,001).
  • Missouri: 1.5% to 5.4% across 9 income brackets ($1,053 to $8,424).
  • Montana: 1% to 6.9% across 7 income brackets ($3,000 to $17,900).
  • Nebraska: 2.46% to 6.84% across 4 income brackets ($3,230 to $31,160).
  • Nevada: No state income tax is charged
  • New Hampshire: A flat income rate of 5%, but only on investment income (savings, dividends).
  • New Jersey: 1.4% to 10.75% across 6 income brackets ($20,000 to $5,000,000)
  • New Mexico: 1.7% to 4.9% across 4 income brackets ($5,500 to $16,001).
  • New York: 4% to 8.82% across 8 income brackets ($8,500 to $1,077,550).
  • North Carolina: A flat income rate of 5.25%.
  • North Dakota: 1.1% to 2.9% across 5 income brackets ($39,450 to $433,200).
  • Ohio: 0% to 4.997% across 8 income brackets ($10,850 to $217,400).
  • Oklahoma: 0.5% to 5% across 6 income brackets ($1,000 to $7,200).
  • Oregon: 5% to 9.9% across 4 income brackets ($3,350 to $125,000).
  • Pennsylvania: A flat income rate of 3.07%.
  • Rhode Island: 3.75% to 5.99% across 3 income brackets ($64,050 to $145,600).
  • South Carolina: 0% to 7% across 6 income brackets ($3,030 to $15,160).
  • South Dakota: No state income tax is charged.
  • Tennessee: A flat income rate of 2% is charged, but only on investment income (savings, dividends).
  • Texas: No state income tax is charged.
  • Utah: A flat income rate of 4.95%.
  • Vermont: 3.35% to 8.75% across 5 income brackets ($38,700 to $195,450).
  • Virginia: 2% to 5.75% across 4 income brackets ($3,000 to $17,001).
  • Washington: No state income tax is charged.
  • West Virginia: 3% to 6.5% across 5 income brackets ($10,000 to $60,000).
  • Wisconsin: 4% to 7.65% across 4 income brackets ($11,760 to $258,950).
  • Wyoming: No state income tax is charged.

What is Taxable Income?

Generally speaking, taxable income covers all money you earn through your employment, business ventures, capital gains, savings account interest, and investments. 

All this needs to be recorded and if you hit the quoted rates, you’re expected to pay tax on it. It can get a little complicated, however, as there are many things that are classed as taxable income and just as many that are not. Here is a short list of the things you do need to report:

  • Money earned through your employer (including strike benefits)
  • Self-employment earnings
  • Money from rental properties
  • Lottery winnings and other prizes
  • Jury duty fees
  • Alimony
  • Unemployment benefits
  • Capital gains (money earned through the sale of assets)
  • Severance pay
  • Interest/dividends earned through investments (stocks, bonds)
  • Royalty payments (books, music, art, etc.,)

And here is a list of the earnings that will not be taxed:

  • Money received through child support and foster care
  • Workers’ compensation benefits
  • Proceeds from a permanent life insurance policy
  • A death benefit received through a life insurance policy
  • Social Security benefits and disability benefits (depending on circumstances)
  • Profits made on the sale of a primary residence (to a point)
  • Money you were given or inherited
  • Grants and scholarships
  • Federal income tax refund

Is it Better to Live in a State with no Income Tax?

If you live in a state that charges state income tax, you might be tempted to high tail it out of there and look for greener pastures, such as states like Texas, where you won’t pay any kind of state income tax. However, there are many more things to consider here.

First of all, the cost of living may be higher in these states, and those additional costs could be enough to offset any money you would make by not paying state taxes. 

Secondly, income tax isn’t the only state or federal tax to factor into the equation. You also have to think about property taxes, sales taxes, and more, and that’s before you consider things like car insurance, life insurance, and health insurance, rates for which can differ greatly from state to state.

It’s a similar story elsewhere. For instance, we mentioned that income taxes are much higher elsewhere, and tend to be at their highest in northern Europe. Many Americans point to these countries as being some of the most expensive to live because of these taxes and, based purely on income tax, they’d be right. However, many of them also have free education and healthcare, so those taxes are put to good use. 

But again, if you moved there purely to save yourself a few bucks, you likely would greatly reduce your healthcare, education, and insurance expenses, but only at the expense of increased income taxes, property prices, and food costs.

In other words, you’re pretty much damned if you do and damned if you don’t, and to borrow another well-worn expression, the only guarantees in life are death and taxes.