Complete State Income Tax Comparison 2025: How Your Location Affects Take-Home Pay

Published: January 2025 | Updated: January 2025 | 12 min read

Where you work in the United States dramatically affects how much money you actually take home each paycheck. Two people earning identical $80,000 salaries can have take-home pay differences of $4,000 to $8,000 per year solely based on which state they work in. This comprehensive guide examines the income tax systems of all 50 states, revealing exactly how your location impacts your financial well-being and providing actionable insights for anyone considering relocation or evaluating job offers in different states.

The Nine States with No Income Tax

Nine states impose no state income tax whatsoever, allowing residents to keep significantly more of their earnings. These states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Working in one of these states immediately increases your take-home pay compared to states that tax income, though this advantage varies depending on your income level and other factors like cost of living and property taxes.

For someone earning $60,000 annually, living in Texas instead of California saves approximately $3,000 to $4,000 per year in state income taxes alone. For a six-figure earner making $120,000, the savings jump to $8,000 to $12,000 annually. These no-tax states make up their revenue through other means: Florida and Texas rely heavily on sales taxes, Alaska uses oil revenues, Nevada depends on tourism and gaming revenues, and New Hampshire has high property taxes despite no income tax.

However, the absence of income tax doesn't automatically make a state more affordable. You must consider the complete financial picture including sales taxes, property taxes, cost of living, housing costs, and available services. New Hampshire, for example, has some of the highest property taxes in the nation, which can offset the income tax savings for homeowners. Similarly, Washington State has a 6.5% base sales tax that can reach over 10% in some cities when local taxes are added.

States with Flat Tax Rates

Thirteen states use a flat income tax system where everyone pays the same percentage regardless of income level. These states include Arizona (2.5%), Colorado (4.4%), Georgia (5.49%), Idaho (5.8%), Illinois (4.95%), Indiana (3.15%), Kentucky (4.0%), Massachusetts (5.0%), Michigan (4.25%), Mississippi (5.0%), North Carolina (4.75%), Pennsylvania (3.07%), and Utah (4.65%).

Flat tax states offer simplicity and predictability. When you know the flat rate, calculating your state tax withholding is straightforward—simply multiply your taxable income by the rate. This system also means that as your income grows, your marginal state tax rate doesn't increase like it would in progressive tax states.

Pennsylvania's 3.07% flat rate makes it one of the lowest-taxed states with an income tax. Someone earning $80,000 in Pennsylvania pays approximately $2,456 in state income tax, while the same earner in neighboring New York could pay $4,500 to $5,500 depending on the specific locality. This $2,000 to $3,000 annual difference accumulates to substantial savings over a career.

Among flat tax states, Indiana offers the lowest rate at 3.15%, making it attractive for high earners who would face steep marginal rates in progressive tax states. Conversely, Georgia's 5.49% flat rate means even low-income workers pay a relatively high percentage compared to progressive states that offer low or zero tax rates on initial income brackets.

States with Progressive Tax Systems

The remaining states employ progressive tax systems with multiple brackets where higher income levels face higher tax rates. These systems are designed to place more tax burden on high earners while offering lower rates or exemptions for lower-income workers.

California: The Highest State Income Taxes

California has the highest state income tax rates in the nation, with nine brackets ranging from 1% to 12.3% for regular income. For single filers in 2025, the brackets are: 1% on income up to $10,412; 2% on income between $10,412 and $24,684; 4% on income between $24,684 and $38,959; 6% on income between $38,959 and $54,081; 8% on income between $54,081 and $68,350; 9.3% on income between $68,350 and $349,137; 10.3% on income between $349,137 and $418,961; 11.3% on income between $418,961 and $698,271; and 12.3% on income over $698,271.

California also imposes an additional 1% Mental Health Services Tax on income exceeding $1 million, bringing the top marginal rate to 13.3%. Combined with the top federal rate of 37%, California's highest earners face a marginal tax rate exceeding 50% before considering FICA taxes, making it the highest-taxed state for high-income individuals.

For middle-income earners, California's impact is still significant but more moderate. Someone earning $75,000 as a single filer pays approximately $4,650 in California state income tax, while the same person in Texas pays zero. Over ten years, that's $46,500 in additional taxes paid to California—enough for a down payment on a house in many parts of the country.

New York: High Rates Plus City Taxes

New York State uses a progressive system with rates from 4% to 10.9%, but New York City residents face an additional city income tax ranging from 2.5% to 3.876%, creating one of the highest combined state and local tax burdens in America. A single filer earning $100,000 in New York City pays approximately $6,900 in state tax and $3,500 in city tax, totaling $10,400 in state and local income taxes annually.

By contrast, the same person earning $100,000 in Houston, Texas pays zero state and local income tax, resulting in $10,400 more take-home pay each year. Over a 30-year career, this difference compounds to over $312,000 in additional taxes paid by the New York City resident, not accounting for investment returns on the money that could have been saved.

New Jersey: High Rates for High Earners

New Jersey has seven tax brackets with rates from 1.4% to 10.75%. The top rate of 10.75% applies to income over $1 million for single filers, making New Jersey one of the highest-taxed states for wealthy individuals. Middle-income earners face rates of 5.525% to 6.37%, which are moderate compared to the highest-tax states but still substantial compared to flat-tax or no-tax states.

New Jersey also has some of the highest property taxes in the nation, with an average effective property tax rate of 2.23%. When combined with income taxes, New Jersey residents face a significant total tax burden. However, the state does offer some offsetting benefits including no sales tax on clothing and relatively good public schools and infrastructure in many areas.

Hawaii: Progressive Rates with High Cost of Living

Hawaii has twelve tax brackets ranging from 1.4% to 11%, with the top rate applying to income over $200,000 for single filers and $400,000 for married couples. While Hawaii's tax rates are high, the extremely high cost of living in the state often overshadows income tax considerations. Housing costs in Hawaii are among the highest in the nation, with median home prices exceeding $800,000 in Honolulu.

Regional Patterns and Trends

Distinct regional patterns emerge when examining state income taxes across America. The Northeast generally has higher income taxes, with states like New York, New Jersey, Connecticut, and Vermont all implementing progressive systems with top rates exceeding 8%. These states historically have larger public sectors, more extensive social services, and higher infrastructure costs due to population density and aging infrastructure.

The South tends toward lower taxation, with many states implementing flat taxes or maintaining low progressive rates. States like Florida, Texas, and Tennessee have no income tax, while North Carolina, Georgia, and Mississippi use flat rates below 6%. This lower-tax approach attracts businesses and contributes to the population growth many Southern states have experienced over the past two decades.

The West shows the most diversity, ranging from zero-tax states like Alaska, Nevada, Washington, and Wyoming to high-tax California and Oregon. This diversity reflects varying political philosophies, revenue sources, and historical development patterns. Resource-rich states like Alaska and Wyoming use natural resource revenues to avoid income taxes, while states without such resources must rely more heavily on income and sales taxes.

Midwest states predominantly use flat taxes, with Illinois, Indiana, Michigan, and others opting for simple, predictable tax systems. These states compete with each other and with nearby no-tax states for businesses and residents, creating pressure to maintain relatively moderate tax rates.

How Income Level Affects State Tax Impact

Your income level significantly affects how state taxes impact you. Low-income workers often pay little or no state income tax even in high-tax states due to standard deductions, personal exemptions, and low initial bracket rates. Someone earning $30,000 might pay $150 in California versus $0 in Texas—a meaningful difference but not life-changing.

Middle-income earners ($50,000 to $100,000) see more substantial differences. The $60,000 earner mentioned earlier saves $3,000 to $4,000 annually by working in Texas instead of California. At $80,000, the gap widens further. These differences are significant enough to impact lifestyle choices, savings rates, and long-term wealth accumulation.

High-income earners face the most dramatic tax differences between states. Someone earning $200,000 in California pays approximately $16,000 to $18,000 in state income tax, while paying zero in Texas or Florida. At $500,000, California state tax reaches $40,000 to $45,000 annually—an amount that could fully fund retirement accounts, pay off a mortgage faster, or support a comfortable lifestyle in a lower-cost area.

For the ultra-high-income earners ($1 million+), state tax differences become even more extreme. California's 13.3% top rate means someone earning $2 million pays approximately $240,000 to $260,000 in state income tax alone, while paying zero in no-tax states. This has driven some wealthy individuals and corporations to relocate to no-tax states, contributing to California's challenges with high-net-worth taxpayer migration.

Real-World Examples: $60,000 Salary Across Different States

Let's examine how a $60,000 annual salary translates to take-home pay across various states for a single filer with standard deductions. These calculations include federal income tax, FICA taxes, and state income tax, but exclude local taxes, health insurance, 401(k) contributions, or other deductions.

In Texas (no state tax), the $60,000 earner takes home approximately $47,100 annually, or $3,925 per month. Federal income tax withholds about $5,700, FICA taxes take $4,590, and Social Security and Medicare combine for $4,590, leaving the earner with 78.5% of gross pay.

In California, the same earner takes home approximately $43,700 annually, or $3,642 per month. State income tax adds another $2,400 in withholding, reducing take-home pay by $3,400 compared to Texas—enough to fund a Roth IRA contribution, make extra car payments, or increase emergency savings significantly.

In Pennsylvania (3.07% flat tax), take-home pay is approximately $45,260, or $3,772 per month. The relatively low flat rate means Pennsylvania competes well with no-tax states for middle-income workers while still generating state revenue.

In New York State (outside NYC), take-home pay drops to approximately $44,400, or $3,700 per month. New York City residents pay even less due to the additional city income tax, with take-home pay of approximately $43,200, or $3,600 per month.

In Oregon, which has no sales tax but relatively high income tax, take-home pay is approximately $44,200, or $3,683 per month. Oregon's lack of sales tax partially offsets the income tax burden, though the exact trade-off depends on spending patterns.

Real-World Examples: $120,000 Salary Across Different States

At higher income levels, state tax differences become more pronounced. For a single filer earning $120,000 with standard deductions:

In Texas (no state tax), annual take-home pay is approximately $86,400, or $7,200 per month. Federal taxes and FICA take a larger percentage than at lower incomes due to progressive federal rates, but the absence of state tax provides significant advantage.

In California, take-home pay drops to approximately $77,800, or $6,483 per month. California state tax withholds approximately $9,600, reducing annual take-home pay by $8,600 compared to Texas. Over ten years, this $86,000 difference could fund college education for a child, purchase a luxury vehicle, or significantly accelerate mortgage payoff.

In Pennsylvania, take-home pay is approximately $82,700, or $6,892 per month. The flat tax system benefits higher earners compared to progressive tax states.

In New York State, take-home pay is approximately $79,500, or $6,625 per month. New York City residents see take-home pay of approximately $76,800, or $6,400 per month, due to additional city taxes.

In New Jersey, take-home pay is approximately $79,000, or $6,583 per month, similar to New York State but with different spending priorities and public services.

Beyond Income Tax: The Complete Tax Picture

State income tax is only one component of your total tax burden. A comprehensive comparison must consider sales taxes, property taxes, vehicle taxes, and other fees that vary widely between states. Some states with no income tax compensate with higher sales or property taxes.

Washington State, which has no income tax, imposes a 6.5% state sales tax that reaches 10.4% in Seattle when local taxes are added. For someone spending $50,000 annually on taxable goods and services, this represents $5,200 in sales tax—potentially more than they would pay in income tax in a moderate-tax state.

Texas has no income tax but relatively high property taxes, with an average effective rate of 1.60%. A $300,000 home in Texas incurs approximately $4,800 in annual property tax, while a similar home in California (with income tax) pays approximately $3,600 in property tax due to Proposition 13 limits. The trade-offs are complex and depend on individual circumstances.

New Hampshire has no income or sales tax but maintains some of the highest property taxes in America, with effective rates exceeding 2.0% in many towns. A $400,000 home can easily incur $8,000 to $10,000 in annual property tax. For high-income renters, New Hampshire is extremely tax-friendly; for middle-income homeowners, the property tax burden can be substantial.

Cost of Living Considerations

State income tax differences must be weighed against cost of living variations. Saving $5,000 annually in state taxes loses its appeal if housing costs $15,000 more per year. California's high taxes come with access to major metropolitan areas, diverse job markets, excellent weather, and cultural amenities. Texas's zero income tax comes with hot summers, property taxes, and varying levels of public services.

The Council for Community and Economic Research publishes cost of living indices showing that San Francisco's cost of living is 94% higher than the national average, while Houston is 4% below average. A $120,000 salary in Houston provides purchasing power equivalent to approximately $233,000 in San Francisco. The $9,600 in California state income tax is dwarfed by the $50,000+ in additional living costs.

Similarly, New York City's cost of living is 68% above the national average, while Austin, Texas is 6% above average. A $100,000 salary in Austin provides purchasing power equivalent to approximately $168,000 in New York City. The state and city tax savings in Texas are significant, but the real financial advantage comes from lower housing and general living costs.

Special Considerations for Remote Workers

The rise of remote work has enabled workers to optimize their state tax situations by living in low-tax states while working for companies based in high-tax states. However, state tax rules for remote workers are complex and vary by state. Some states tax you based on where you perform the work, while others tax based on where your employer is located.

New York's "convenience of the employer" rule can tax non-residents who work remotely for New York employers if the remote work is for the employee's convenience rather than employer necessity. This controversial rule has led to legal challenges and requires careful tax planning for remote workers with New York employers.

California uses a stringent residency test that can tax individuals who spend significant time in California even if they claim residence elsewhere. High-income individuals who maintain California connections must carefully document their residency to avoid California tax liability.

Conversely, states like Florida, Texas, and Nevada actively attract remote workers through no income tax policies and relatively affordable lifestyles in many areas. The pandemic-era migration to these states reflects workers optimizing their tax situations alongside other lifestyle preferences.

Long-Term Wealth Accumulation

State tax differences compound dramatically over time when you consider investment returns on the saved money. Someone who saves $5,000 annually in state taxes by living in Texas instead of California has $5,000 more to invest each year. Assuming a 7% average annual return, this $5,000 annual investment grows to approximately $246,000 after 25 years.

For a high earner saving $15,000 annually in state taxes, the 25-year accumulation reaches approximately $738,000 with the same 7% return assumption. This represents a significant retirement nest egg or the ability to retire years earlier solely due to state tax optimization.

These calculations assume the saved money is invested rather than spent, but they illustrate the long-term wealth building impact of state tax decisions. Combined with other financial strategies like maximizing 401(k) contributions and living below your means, state tax optimization can significantly accelerate financial independence.

Making Your Decision

Choosing where to live based on state taxes requires weighing multiple factors including job opportunities, career growth potential, family considerations, lifestyle preferences, climate, and cultural fit. State taxes are important but shouldn't be the sole decision factor.

For high-income earners, state tax differences often justify relocation, especially when combined with lower cost of living. A $200,000 earner can save $12,000 to $16,000 annually by moving from California to Texas, a difference that justifies the disruption of moving for many people.

For middle-income earners, the decision is more nuanced. The $3,000 to $5,000 annual savings might be meaningful but may not outweigh family connections, career opportunities, or lifestyle preferences. However, someone early in their career establishing roots might strongly consider starting in a low-tax state to maximize lifetime wealth accumulation.

For families with children, state differences in education quality, safety, and family-friendly amenities often outweigh tax considerations. Some high-tax states like Massachusetts offer excellent public schools and universities, while some low-tax states have less robust educational systems.

Conclusion

State income taxes create substantial differences in take-home pay and long-term wealth accumulation, with annual savings ranging from a few hundred dollars to tens of thousands depending on income level and state choice. The nine states with no income tax offer immediate advantages, especially for high earners, while flat-tax states provide simplicity and moderate burdens. Progressive tax states vary widely, with California, New York, and New Jersey imposing the highest rates.

Your optimal state tax situation depends on your income level, career stage, family situation, and lifestyle priorities. Use our calculator to estimate your exact take-home pay in different states, and consider the complete picture including cost of living, career opportunities, and quality of life factors. State tax planning is one tool among many for building wealth, but it's a powerful one that deserves careful consideration when making location decisions.