Income tax is an unavoidable part of life, and the amount you will owe depends on a number of factors, including your income level and the state in which you live. Depending on the state, income tax rates can range from 0% to as high as 13.3%. As of 2023, the highest state income tax rate is 13.3%, which applies to California residents who make more than $1 million in taxable income. Here, we look at the five states with the highest income tax rates, including California, as well as the three states with the lowest rates.
The 5 States With The Highest State Income Tax Rates
California tops the list of states with the highest income tax rate. The Golden State has a top income tax rate of 13.3% for all income above $1 million. This top rate applies to all California residents, regardless of their filing status. For those making less than $1 million, the top rate is 12.3%.
Oregon has the second-highest income tax rate in the country. It is 9.9% for all income above $125,000. For those making less than that, the top rate is 9.0%. Oregon also has a flat rate of 5% for all income below $125,000.
The third-highest income tax rate is in Minnesota, where the top rate is 9.85%. This applies to all income above $160,030. Income below this threshold is taxed at a lower rate, ranging from 5.35% to 9.84%.
The fourth-highest rate is in Iowa, where the top rate is 8.98%. This applies to all income above $72,900. Income below this threshold is taxed at a lower rate of 0.36% to 8.53%.
The fifth-highest rate is in New Jersey, where the top rate is 8.97%. This applies to all income above $5 million. Income below this threshold is taxed at a lower rate, ranging from 1.4% to 8.97%.
The 3 States With The Lowest State Income Tax Rates
While California and four other states boast of the highest state income tax rates, there are also three states with the lowest rates. These are Wyoming, Alaska, and Florida. Wyoming has the lowest rate of 0%, while Alaska has the second-lowest rate of 1.1%. Florida has the third-lowest rate of 3.5%.
It is important to note that many of these states with the lowest rates do not have an income tax. Wyoming, Alaska, and Florida are all states without an income tax. As such, their residents do not have to pay any income tax. The state of Nevada also does not have an income tax, but its residents do have to pay a 2.6% payroll tax.
Conclusion
The state in which you live can have a major impact on the amount of income tax you will owe. California has the highest rate of 13.3%, while Wyoming has the lowest rate of 0%. Alaska and Florida also have no income tax, while Nevada has a 2.6% payroll tax. It is important to understand the income tax rates of the state in which you live so that you can plan accordingly and make sure you are paying the right amount of taxes.
