State Income Tax Overview

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In addition to having to pay federal income tax each year to the Internal Revenue Service (IRS), a majority of states in the

United States have a state income tax as well.  State income tax is simply a tax charged by a state on the income that people in that state earn.

Each state has the authority to levy an income tax and to choose the manner in which they determine the tax rate.  As of the writing of this article, forty-one states impose some form of income tax on individuals.  The nine states that do not have any form of income tax on individuals include Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, and Wyoming.

As each state has the authority to determine the tax rules it will use, the tax rules can vary a great deal from state to state.  For example, some states use a graduated method of calculating income tax, where the taxpayer pays at a higher tax rate with the more income he earns.  However, other states charge a fixed percent as a tax rate regardless of the amount of income earned.

Common Characteristics

Even so, there are common characteristics generally shared by many of the states when it comes to state income tax.  These common characteristics include but may not be limited to the following:

  • Gross income usually incomes all sources of income, with a few exceptions commonly including the income from local, state, and federal bonds, as well as Social Security benefits
  • Employers are expected to withhold estimated amounts needed to pay state income tax
  • It is up to the individual to determine the amount of state income tax they owe and to file a state income tax return
  • States have their own taxing authorities that are responsible for determine the tax rules of that state and for collecting state income tax owed
  • The filing date for state income tax is April 15 for most states
  • People who earn income in a state are subject to paying income tax of that state, whether the person is a resident of that state or is simply working in that state but resides in another state
  • States will charge interest and impose penalties on taxpayers who do not file their state income tax return on time or who are found to owe additional state income tax once the state taxing authority has had the opportunity to review the return
  • An individual’s income is only subject to state income tax one time, so if you work in another state that has state income tax, then you receive a tax credit for that amount when you report the income on your home state income tax
  • State income tax paid is deductible from federal income tax

If you have questions about state income tax, need help filing your state income tax return, or owe back state or federal income taxes you cannot pay, you should contact a tax attorney who is familiar with the tax laws of the state where you live.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.