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Key Findings
- Individual income taxes are a major source of state government revenue, constituting 38 percent of state taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
collections in fiscal year 2022, the latest year for which data are available. - Forty-three states and the District of Columbia levy individual income taxes. Forty-one tax wage and salary income. New Hampshire exclusively taxes dividend and interest income while Washington only taxes capital gains income. Seven states levy no individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S.
at all. - Among those states taxing wages, 12 have a single-rate tax structure, with one rate applying to all taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income.
. Conversely, 29 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Hawaii has 12 brackets, the most in the country. - States’ approaches to income taxes vary in other details as well. Some states double their single-filer bracket widths for married filers to avoid a “marriage penaltyA marriage penalty is when a household’s overall tax bill increases due to a couple marrying and filing taxes jointly. A marriage penalty typically occurs when two individuals with similar incomes marry; this is true for both high- and low-income couples.
.” Some states index tax brackets, exemptions, and deductions for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power.
; many others do not. Some states tie their standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act (TCJA) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes.
and personal exemption to the federal tax code, while others set their own or offer none at all.
Individual income taxes are a major source of state government revenue, accounting for 38 percent of state tax collections. Their significance in public policy is further enhanced by individuals being actively responsible for filing their income taxes, in contrast to the indirect payment of sales and excise taxes.
Forty-three states levy individual income taxes. Forty-one tax wage and salary income. New Hampshire exclusively taxes dividend and interest income while Washington only taxes capital gains income. Seven states levy no individual income tax at all.
Of those states taxing wages, 12 have single-rate tax structures, with one rate applying to all taxable income. Conversely, 29 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Montana, for example, is one of several states with a two-bracket income tax system. At the other end of the spectrum, Hawaii has 12 brackets. Top marginal rates span from Arizona’s and North Dakota’s 2.5 percent to California’s 13.3 percent. (California also imposes a 1.1 percent payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue.
on wage income, bringing the all-in top rate to 14.4 percent as of this year.)
In some states, a large number of brackets are clustered within a narrow income band. For example, Virginia’s taxpayers reach the state’s fourth and highest bracket at $17,000 in taxable income. In other states, the top rate kicks in at a much higher level of marginal income. For example, the top rate kicks in at or above $1 million in California (when the “millionaire’s tax” surcharge is included), Massachusetts, New Jersey, New York, and the District of Columbia.
The table below shows how each state’s individual income tax is structured. Compare states with no income tax, flat income taxes, or graduated-rate income tax.
Income Tax Structures by State
States’ approaches to income taxes vary in other details as well. Some states double their single-filer bracket widths for married filers to avoid imposing a “marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation, while many others do not. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all.
The Tax Cuts and Jobs Act (TCJA) increased the standard deduction (set at $14,600 for single filers and $29,200 for joint filers in 2024) while suspending the personal exemption by reducing it to $0 through 2025. As many states use the federal tax code as the starting point for their own standard deduction and personal exemption calculations, some states that previously linked to these provisions in the federal tax code have updated their conformity statutes in recent years. They either adopted federal changes, retained their previous deduction and exemption amounts, or maintained their own separate system while increasing the state-provided deduction or exemption amounts.
In the following tables, we have compiled the most up-to-date data available on state individual income tax rates, brackets, standard deductions, and personal exemptions for both single and joint filers. Following the tables, we document notable individual income tax changes implemented in 2024.
2024 State Income Tax Rates and Brackets
Notable 2024 State Individual Income Tax Changes
Last year continued the historic pace of income tax rate reductions. In total, 26 states enacted individual income tax rate reductions from 2021 to 2023. Only Massachusetts and the District of Columbia increased their top marginal tax rates in those years. Several changes implemented later in 2023 were retroactive to January 1, 2023. However, a number of notable changes come into effect on January 1, 2024, or are set to occur on specific future dates, with rates phasing down incrementally over time. Some of the scheduled future rate reductions rely on tax triggers, where specific changes to tax rates will occur once certain revenue benchmarks are met. Notable changes to major individual income tax provisions already certified for 2024 include the following:
Arkansas
Under S.B. 8, enacted in September 2023, the top individual income tax rate in Arkansas was reduced from 4.7 percent to 4.4 percent for tax years beginning on or after January 1, 2024. This top rate applies to incomes between $24,300 and $87,000 for taxpayers earning $87,000 or less and to incomes over $8,801 for taxpayers earning more than $87,000.
Connecticut
As part of the state budget bill, H.B. 6941, Connecticut legislators reduced individual income tax rates for the two lowest brackets, from 3 percent to 2 percent and from 5 percent to 4.5 percent, respectively. The change comes into effect on January 1, 2024. The reduction will not affect taxpayers with an annual income of $150,000 or above ($300,000 or above for married couples filing a joint return).
Georgia
On January 1, 2024, Georgia transitions from a graduated individual income tax with a top rate of 5.75 percent to a flat taxAn income tax is referred to as a “flat tax” when all taxable income is subject to the same tax rate, regardless of income level or assets.
with a rate of 5.49 percent. Additionally, the state significantly increased its personal exemption (to $12,000 for single taxpayers and $18,500 for married couples filing a joint return). These changes were enacted by H.B. 1437 in April 2022.
Indiana
Under H.B. 1001, enacted in May 2023, Indiana accelerated its previously enacted tax rate reductions, lowering the individual income tax rate from 3.15 in 2023 to 3.05 percent in 2024. The law also repealed previously enacted tax triggers, instead prescribing a rate reduction to 3.0 percent in 2025, 2.95 percent in 2026, and 2.9 percent in 2027 and beyond.
Iowa
As part of its comprehensive tax reform, effective January 1, 2024, Iowa consolidated its four individual income tax brackets into three (H.F. 2317). As a result, its top rate decreased from 6 percent to 5.7 percent. The state is currently transitioning to a flat income tax system with a rate of 3.9 percent by 2026.
Kentucky
H.B. 1, signed into law in February 2023, reduced Kentucky’s flat individual income tax rate from 4.5 percent in 2023 to 4.0 percent starting in 2024, codifying a reduction that was triggered under the conditions established by H.B. 8, enacted in 2022.
Mississippi
Under H.B. 531, enacted in April 2022, Mississippi will continue reducing its flat individual income tax rate from 2024 to 2026. Effective January 1, 2024, the tax rate decreased from 5 percent to 4.7 percent (applied on taxable income exceeding $10,000).
Missouri
Effective January 1, 2024, Missouri’s Department of Revenue reduced its top individual income tax rate from 4.95 percent to 4.8 percent as the respective revenue triggers were met in the previous fiscal year, per S.B. 3 enacted in October 2022.
Montana
S.B. 121, enacted in March 2023, simplified the individual income tax system in Montana and, effective January 1, 2024, reduced the number of tax brackets from seven to two with the top tax rate of 5.9 percent. Additionally, starting in 2024, taxpayers will use their federal taxable income as a base for calculating Montana taxable income, implying that the federal standard deduction or the sum of itemized deductions will be automatically accounted for.
Nebraska
L.B. 754, enacted in May 2023, reduced the top individual income tax rate from 6.64 percent in 2023 to 5.84 percent in 2024 and outlined the gradual reduction of the state’s top rate to 3.99 percent by 2027.
New Hampshire
New Hampshire continues to phase out its interest and dividends tax. In 2024, per H.B. 2, the tax rate will go down from 4 percent to 3 percent. Starting in 2025, the tax will be repealed, two years earlier than initially planned.
North Carolina
Under H.B. 259, enacted in September 2023, North Carolina accelerated the reduction of its flat individual income tax rate. Effective January 1, 2024, the tax rate decreased from 4.75 percent to 4.5 percent. The rate is scheduled to decline to 3.99 percent by 2026.
Ohio
H.B. 33, enacted in July 2023, reduced the number of individual income tax brackets in Ohio from three to two and lowered the top rate from 3.75 percent to 3.5 percent, continuing the individual income tax rate reduction and simplification trend that state legislators started in 2021.
South Carolina
Effective January 1, 2024, South Carolina reduced its top individual income tax rate from 6.5 percent to 6.4 percent, per S.B. 1087. Further reductions to 6 percent are scheduled but are subject to general fund revenue triggers. Governor McMaster’s executive budget assumes that the revenue trigger for the previous fiscal year was met, and the top rate must go down further to 6.3 percent, as per the statutory schedule. The change has not yet been confirmed by the state’s Department of Revenue.
Historical State Individual Income Tax Rates
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