2021 State Income Tax Rates

2021 State Income Tax Rates

lowest state income tax rates in us

The property tax on our hypothetical middle-class family’s $300,000 home in Wyoming would be about $1,815, which is tied the 11th-lowest property tax amount in our rankings. For instance, property taxes are fairly close to the national average. For a $300,000 home in Florida, our hypothetical middle-class family’s estimated annual property tax bill is $2,577. That’s pretty much in the middle when compared to other states.

  • Nine states either don’t levy income tax at all or only collect it on interest and dividend income from investments.
  • Some states have a flat income tax rate that applies to all residents regardless of income.
  • Florida is another state with no income tax (are you starting to notice a trend here?).
  • Most of the final incidence of these taxes is assumed to fall on owners of corporate stock, and about a quarter is assumed to fall on workers in the form of lower wages.
  • A state’s largest city is used as a proxy for local tax rates.
  • Those with taxable income over $500,000 but not over $1 million will pay $42,775 plus 9.75 percent of the excess over $500,000.
  • Nevertheless, Texans’ overall tax bite is still one of the lowest in the U.S., with the state ranking 19th.

Low personal income tax rates can be misleading; a lack of available tax deductions, for example, can raise the effective rate you pay. The Retirement Living Information Center states that figuring your total tax burden, including sales and property taxes, can give you a more accurate reading on affordability, especially if you’re on a fixed income. However, these states with the lowest taxes on income can be a good place to start looking for a more affordable location. Forty-three states impose a tax on the income of individuals, sometimes referred to as personal income tax. States imposing an income tax on individuals tax all taxable income of residents.

Total Tax Burden: 5.10%

Florida is another state with no income tax (are you starting to notice a trend here?). That keeps the overall state and local tax burden down for middle-class families and everyone else. However, other taxes in the Sunshine State are just average when compared to other locations.

These range from fully exempting all pension benefits for adults above a certain age (three states — Illinois, Mississippi, and Pennsylvania) to only exempting very specific benefits such as those for military veterans. More than a dozen states allow senior citizens an extra personal exemption or exemption credit, allowing these taxpayers to shelter twice as much of their income from us state income tax rates tax as similar non-elderly taxpayers can claim. There are two broad ways in which a distributional analysis can sort taxpayers by income level. One approach, used by legislative fiscal analysts in most states, uses income definitions based on “Adjusted Gross Income.” In this approach, the starting point is the income that is actually subject to income taxes in a given state.


For example, Hawaii has a top tax rate of 11% and 12 income brackets, while Iowa has a top tax rate of 8.53% and nine income brackets. We think it’s important for you to understand how we make money. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials. Our independent analysts pored over the perks and user reviews for the most popular tax provider services to land on the best-in-class picks to file your taxes. Get started by reviewing our list of the best tax software.

Why Do States Charge a State Tax?

Following the adoption of the U.S. Constitution, the federal government was granted the authority to impose taxes on its citizens. Each state also retained the right to impose what kind of tax it wanted, excluding any that are forbidden by the U.S. Constitution as well as its own state constitution. These states fund their governments through tax collection, fees, and licenses.