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As of January 1, 2025, 10 states modified their earnings tax codes. 9 of these states decreased their tax charges, and one now not taxes earned earnings. Discover out what which means for you.
Key Takeaways
- Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, and West Virginia are decreasing their tax charges efficient Jan. 1, 2025.
- 9 states, now together with New Hampshire, don’t tax earned earnings in any respect.
- Fourteen states impose a flat, single tax price on all earnings, and 29 have a marginal earnings tax price, which means the extra you earn the extra you pay.
What’s New in 2025?
In 29 states and Washington, D.C., residents should pay marginal earnings tax charges. That signifies that in these states, the extra you earn, the higher the proportion you’ll pay in your high greenback. This stands in distinction to a flat tax, which is a single price that applies to everybody and to your entire {dollars}, regardless of how a lot you earn.
Kansas has twice tried to alter over to a flat tax price however its governor vetoed the proposal in 2023 and once more in 2024. The state nonetheless has a marginal tax price in 2025. Georgia and Pennsylvania transformed to flat tax charges early in 2024. Louisiana did the identical in November 2024. New Hampshire’s earlier tax on dividend and curiosity earnings is now not efficient beginning in 2025, which means it joins the ranks of the states that don’t tax earnings. And Iowa is changing to a flat tax price starting in 2025.
9 states decreased their tax charges efficient Jan. 1, 2025. Some have flat tax charges and a few impose marginal charges:
- Indiana
- Iowa
- Louisiana
- Mississippi
- Missouri
- Nebraska
- New Mexico
- North Carolina
- West Virginia
In accordance with the Tax Basis’s 2025 State Tax Competitiveness Index, Wyoming is the perfect state to reside in, taxes-wise, whereas New York is the worst.
Prime State Earnings Tax Charges
What is going to you pay in your state? These are the highest tax charges in every state as of tax 12 months 2025.
| Prime State Earnings Tax Charges of 2025 | ||
|---|---|---|
| Alabama | 5.00% | |
| Alaska | 0.00% | |
| Arizona | 2.50% | |
| Arkansas | 4.90% | |
| California | 13.30% | |
| Colorado | 4.40% | |
| Connecticut | 6.99% | |
| Delaware | 6.60% | |
| District of Columbia | 10.75% | |
| Florida | 0.00% | |
| Georgia | 5.75% | |
| Hawaii | 11.00% | |
| Idaho | 5.80% | |
| Illinois | 4.95% | |
| Indiana | 3.00% | Efficient Jan. 1, 2025 |
| Iowa | 3.80% | Efficient Jan. 1, 2025 |
| Kansas | 5.70% | |
| Kentucky | 4.50% | |
| Louisiana | 3.00% | Efficient Jan. 1, 2025 |
| Maine | 7.15% | |
| Maryland | 5.75% | |
| Massachusetts | 9.00% | |
| Michigan | 4.25% | |
| Minnesota | 9.85% | |
| Mississippi | 4.40% | Efficient Jan. 1, 2025 |
| Missouri | 4.70% | Efficient Jan. 1, 2025 |
| Montana | 6.75% | |
| Nebraska | 5.20% | Efficient Jan. 1, 2025 |
| Nevada | 0.00% | |
| New Hampshire | 0.00% | Efficient Jan. 1, 2025 |
| New Jersey | 10.75% | |
| New Mexico | 5.90% | Efficient Jan. 1, 2025 |
| New York | 10.90% | |
| North Carolina | 4.50% | Efficient Jan. 1, 2025 |
| North Dakota | 2.64% | |
| Ohio | 3.99% | |
| Oklahoma | 4.75% | |
| Oregon | 9.90% | |
| Pennsylvania | 3.07% | |
| Rhode Island | 5.99% | |
| South Carolina | 6.50% | |
| South Dakota | 0.00% | |
| Tennessee | 0.00% | |
| Texas | 0.00% | |
| Utah | 4.85% | |
| Vermont | 8.75% | |
| Virginia | 5.75% | |
| Washington | 7.00% | |
| West Virginia | 4.82% | Efficient Jan. 1, 2025 |
| Wisconsin | 7.65% | |
| Wyoming | 0.00% | |
Sources: Tax Basis and Tax-Charges.org
States With a Flat Tax Price
Fourteen states fall into the flat-tax class:
- Arizona
- Colorado
- Georgia
- Idaho
- Illinois
- Indiana
- Iowa
- Kentucky
- Louisiana
- Massachusetts
- Michigan
- North Carolina
- Pennsylvania
- Utah
Mississippi doesn’t make the listing nevertheless it falls right into a grey space. This state technically has two earnings tax charges however one in every of them is 0%. It applies to earnings below $10,000. All earnings over $10,000 is taxed at 4.4% as of 2025.
States with No Earnings Tax
Some are fortunate sufficient to reside in one of many 9 states with out an earnings tax. The 9 income-tax-free states as of 2025 are:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Wyoming makes the listing as a result of this state doesn’t tax earned earnings, solely capital beneficial properties.
The Backside Line
The extent of your state-level tax invoice varies relying on the place you reside. Some states impose a single, flat tax price. Others tax your high {dollars} at a better share as you earn extra. A number of haven’t any earnings tax in any respect.
State tax legal responsibility might be additional sophisticated by states altering their tax codes from one 12 months to the following. You should definitely do your analysis earlier than you put together your 2024 state tax return and do your homework so you are able to do efficient tax planning for 2025.
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