Because many states use the federal tax code as the starting point for their own standard deduction and personal exemption calculations, some states that coupled to the federal tax code updated their conformity statutes in recent years to either adopt federal changes or retain their previous deduction and exemption amounts. The federal Tax Cuts and Jobs Act of 2017 (TCJA) increased the standard deduction (set at $12,400 for single filers and $24,800 for joint filers in 2020), while suspending the personal exemption by reducing it to $0 through 2025. In the following table, we provide 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. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all. 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 many others do not. States’ approaches to income taxes vary in other details as well. New York and New Jersey’s top rates kick in at even higher levels of marginal income: $1,077,550 and $5 million, respectively. In the District of Columbia, the top rate kicks in at $1 million, as it does in California (when the state’s “millionaire’s tax” surcharge is included). In some states, a large number of brackets are clustered within a narrow income band Georgia’s taxpayers reach the state’s sixth and highest bracket at $7,000 in annual income. Top marginal rates range from North Dakota’s 2.9 percent to California’s 13.3 percent. At the other end of the spectrum, Hawaii has 12 brackets. Kansas, for example, imposes a three-bracket income tax system. Conversely, 32 states levy graduated-rate income taxes, with the number of brackets varying widely by state. Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income. Tennessee is currently phasing out its Hall Tax (an income tax applied only to dividends and interest income), with complete repeal scheduled for tax years beginning January 1, 2021. Forty-one tax wage and salary income, while two states-New Hampshire and Tennessee-exclusively tax dividend and interest income.
Their prominence in public policy considerations is further enhanced in that individuals are actively responsible for filing their income taxes, in contrast to the indirect payment of sales and excise taxes.įorty-three states levy individual income taxes. Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections. Some states double their single-bracket widths for married filers to avoid a “ marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation many others do not.
Conversely, 32 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income.Seven states levy no individual income tax at all. Forty-three states levy individual income taxes.Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections in fiscal year (FY) 2017.
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