State income taxes may or may not be required depending on where you live. State taxes can be either uniform or progressive, depending on the state in question. "flat tax" refers to a tax on all income equally. A total of nine states have adopted this system, including Colorado (4.55 percent), Illinois (4.95 percent), Indiana (3.23%), Kentucky (0.0 percent), Massachusetts (0.0%), Michigan (4.25%), North Carolina (5.25%), Pennsylvania (0.37%) and the state of Utah (0.37%) (4.95 percent ).

When a state has a progressive tax system, the wealthier residents pay a higher share of their income in taxes. To put it another way, the Internal Revenue Service uses the same strategy. Rather than relying on the federal tax code's brackets, many states have their systems in place. On the other hand, the federal government does not modify its tax bands yearly to account for inflation.

Hawaii has 12 tax brackets, whereas Kansas and six other states only have three. The state's highest top tax rate of 13.3 percent applies to individuals earning more than $1 million a year and married couples earning more than $1.198,024 a year. Those single or married and who earn more than $440,600 per year in North Dakota are subject to a marginal tax rate of 2.9 percent.

Some states do not make tax income, while others levy very little rates. Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not impose income taxes on their people. Only interest and dividend income is taxed in New Hampshire; other types of income, such as salaries and wages, are not. Individuals and married couples filing jointly who earn $539,900 will be subject to a 37 percent tax rate beginning in the 2022 tax year.

Taxes Paid at the Federal and State Levels

Hampshire residents who earn $75,000 in taxable income and $3,000 in interest are eligible for the state's tax credits. From there, we'll move on to federal income taxes. Only the remaining $600 ($3,000 $2,400) of interest and dividend income is liable to tax in New Hampshire.

There is no state tax on interest or dividend income in New Hampshire. As a result, taxpayers would only be responsible for $30 in state taxes. If the taxpayer's taxable income were $78,000, the tax rate would be 0.38 percent or 0.38 percent.

All taxable income in Utah is taxed at a flat rate of 4.95 percent, regardless of whether the money is earned or unearned. If they made $78,000, they would pay $3,861 in state taxes.

Under the progressive tax system, the first $9,950 of this taxpayer's taxable income (without interest) would be taxed at $995. Because of this, if their annual income were between $9,000 and $40,526 ($3,669.12 x $12,248.40), they would be responsible for a total tax bill of $12,248.01. A 16.3% federal tax rate would be in effect if they paid the full amount of their taxes.

How are federal and state income taxes different?

When it comes to federal income taxes, the federal government collects them instead of the states where a taxpayer lives and works. Things can get a little more complicated if you live in one state and work in another, as they have during the pandemic.) One of the seven federal tax brackets ranges from 10 percent to 37 percent. Some countries use a flat tax, while others use a progressive system, or there is no income tax.

Extra Attention Is Required You can take a simple deduction or itemize your deductions in the federal tax system. The TCJA considerably increased basic deductions in 2018, making it more appealing for many taxpayers.

The categories of income taxed and the deductions and credits allowed by states and the federal government vary. Taxes are imposed on pension and Social Security income in some states, while they are completely exempt in others. In addition to federal income taxes, the yields on savings bonds and other U.S. Treasury assets are also exempt. Because some types of income are excluded from state taxation, they are subject to federal taxation.

Is There a Difference in State Income Taxes?

It does not matter where you live about your federal income tax rate. The same federal tax rates apply to everyone, regardless of where they live. Based on where they live and how much they make, the total amount of taxes due by an individual can vary greatly. . The state of New Hampshire plans to remove personal income taxes by 2027, at which point the state will no longer collect them.