When it’s time to settle up with the government, most taxpayers think only of their federal income tax, but in many parts of the country, state taxes can claim a sizable part of your income, too. Paying state taxes is something nobody likes to think about. However, you can usually deduct state taxes on your federal return. But here’s what you need to know about state taxes.
Which states have lower or no taxes?
State tax rates vary from jurisdiction to jurisdiction, and some states don’t charge any income tax at all. Those states include:
- South Dakota.
Before you pack your bags, however, remember that these states make up that revenue in other ways, such as corporate income taxes, sales taxes, or higher property taxes than states with a personal income tax.
Which states are the worst?
Forty-one states and the District of Columbia assess income tax on their residents. These tax rates vary from state to state, and they’re considerably less than federal income tax with the highest bill coming in at 11 percent on incomes exceeding $400,000 per couple.
Here are the states with the highest income taxes:
- Rhode Island.
- New Jersey.
- New York.
- Washington, D.C.
What about my state?
To learn about the state tax rates where you live, check with your local taxing authority or visit Bankrate’s tax guide.