State & Local Taxes
State income tax, local taxes, and how they vary by state
Do I have to pay taxes in two states?
You may need to file tax returns in two states, but you typically won't pay full taxes to both. If you live in New Jersey and work in New York, you'll pay NY tax on work income but get a credit on your NJ return. About 27% of US workers commute across state lines according to Census data.
How much is Florida income tax?
Florida has no state income tax at all — 0%. This means a $75,000 salary in Florida keeps roughly $3,750-$4,500 more per year compared to high-tax states like California (13.3% top rate) or New York (10.9% top rate).
How does remote work affect my state taxes?
Remote work affects your state taxes based on where you live, not where your employer is located. If you live in Texas (no state income tax) but work for a New York company, you typically pay no state income tax. However, 'convenience of employer' states like New York may still try to tax your remote work income.
How does state income tax affect my paycheck?
State income tax reduces your take-home pay by 0-13% of your gross income, depending on your state and income level. For example, a $75,000 salary faces $0 state tax in Texas but $6,975 in California (9.3% rate), reducing monthly take-home pay by $581.
How does my state tax rate compare to other states?
State income tax rates range from 0% (nine states) to 13.3% (California). The median state has a top rate of 6.5%. A worker earning $75,000 pays $0 in Texas but $6,814 in Oregon and $3,281 in Colorado — a $6,814 annual difference between highest and lowest.
How does Washington state tax income (capital gains only)?
Washington state has no income tax on wages, salaries, or most investment income. However, it imposes a 7% capital gains tax on profits over $250,000 annually from selling stocks, bonds, and business interests. This affects fewer than 4,000 residents per year.
How does local income tax work in cities like NYC and Philadelphia?
Local income tax is an additional tax imposed by cities or counties on earned income. NYC charges 3.078-3.876% based on income level, while Philadelphia charges a flat 3.8712%. These taxes are withheld from your paycheck automatically if you work in the city, even if you live elsewhere.
How much is California state income tax?
California state income tax ranges from 1% to 13.3% based on income, with most middle-income earners paying 6-8%. A single filer earning $75,000 pays approximately $2,400 in CA state tax (3.2% effective rate), while someone earning $150,000 pays about $8,100 (5.4% effective rate). High earners face the nation's highest state tax rates.
How much is New York state income tax?
New York state income tax ranges from 4% to 10.9% depending on your income and filing status. For 2026, a single filer earning $75,000 pays about $3,919 in NY state tax (5.23% effective rate), while NYC residents pay an additional 3.078%-3.876% in city tax.
How much is Texas income tax?
Texas has no state income tax. You pay $0 in Texas state income tax regardless of your income level. However, Texas has a 6.25% state sales tax (up to 8.25% with local taxes) and property taxes averaging 1.6% of home value annually.
What is a reciprocal tax agreement between states?
A reciprocal tax agreement allows residents of one state to work in another without paying income tax to the work state — only to their home state. Currently 16 states participate in these agreements, covering about 45% of cross-border commuters and eliminating dual filing requirements.
What states have a flat income tax rate?
Currently 8 states have flat income tax rates in 2026: Colorado (4.40%), Illinois (4.95%), Indiana (3.23%), Kentucky (4.50%), Michigan (4.25%), North Carolina (4.75%), Pennsylvania (3.07%), and Utah (4.85%). This means everyone pays the same percentage regardless of income level.
What is Oregon's income tax rate and why is it high?
Oregon's income tax rates range from 4.75% to 9.9% for 2026, making it the 4th highest in the US. A worker earning $75,000 pays about $4,425 in Oregon state tax annually — roughly $170 per paycheck. Oregon has no sales tax, so the state relies heavily on income taxes for revenue.
What is a paid family leave (PFL) payroll deduction on my paycheck?
Paid Family Leave (PFL) is a payroll deduction that funds paid time off for bonding with new children or caring for seriously ill family members. In California, employees pay 0.9% of wages up to $153,164 in 2026, providing up to 8 weeks of benefits at 60-70% wage replacement.
What is the SALT deduction and is it still capped in 2026?
The SALT deduction lets you deduct state and local income, sales, and property taxes on your federal return. The $10,000 cap remains in effect for 2026, meaning you can only deduct up to $10,000 total in state/local taxes, regardless of how much you actually paid.
What is a state disability insurance (SDI) deduction on my paycheck?
State Disability Insurance (SDI) is a payroll deduction that provides partial wage replacement if you can't work due to non-work-related illness or injury. In California, employees pay 0.9% of wages up to $153,164 in 2026, which equals a maximum annual deduction of $1,378.
What is a state tax credit for taxes paid to another state?
A state tax credit for taxes paid to another state prevents double taxation when you owe income tax to multiple states. Most states offer a credit equal to the lesser of: taxes paid to the other state or your home state's tax on that same income, typically reducing your total state tax burden by $500-2,000 annually for cross-border workers.
What is the highest state income tax rate?
California has the highest state income tax rate at 13.3% for income over $1 million, with an additional 1% Mental Health Services Tax on income over $1 million. The top marginal rate reaches 14.4% for the highest earners, making California's combined state tax burden the nation's highest.
Which states have no income tax?
Nine states have no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Workers in these states typically keep 5-10% more of their gross pay compared to high-tax states like California (13.3% top rate).
What happens when I work in a different state than I live?
You'll typically file tax returns in both states — your work state (non-resident return) and home state (resident return). However, most states provide tax credits to prevent double taxation. About 45% of cross-border commuters qualify for reciprocal agreements that simplify this process.