Similar to the U.S. federal government, U.S. states can impose additional income taxes on their residents' earnings. And while every U.S. state has its own authority to create its own tax system, most jurisdictions use the same structure as the U.S. federal government. There are a few states that impose a flat rate on income tax for all taxpayers, while others don’t charge any state tax at all.
In this regard, there are about eight states that levy the same flat rate on all income levels. These include Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, Colorado, Illinois, and Utah. This means that if you live in Pennsylvania and you earn $100,000, you only pay $3,070. And if you earn $1,000,000, you only pay $30,700.
As mentioned before, there are seven other states that do not charge any state tax at all, which include Texas, Nevada, Alaska, Florida, Washington, South Dakota, and Wyoming. However, that is not to say that residents in these states don’t pay taxes, as there are still other common state taxes they are liable for, such as sales tax and property taxes.
You also have to keep in mind that taxpayers who earn their income in one or more states than where they live may still need to file state tax returns in those respective states too. Moreover, states that impose an income tax may do so on corporations, partnerships, and certain estates. Plus, failure to pay these state taxes on time and in full can result in penalties and interest.
Nevertheless, if you do pay state income tax, then you should know that the IRS allows you to claim a deduction on your federal tax return for them. On the other hand, if you want a deduction on your state income tax, you will need to itemize deductions on your federal tax returns.