State Income Tax Comparison: Best and Worst States for Take-Home Pay

Why State Income Tax Matters More Than You Think

State income tax is one of the largest controllable factors affecting your take-home pay. While federal tax brackets are the same everywhere, state taxes create dramatic differences in what workers actually keep. Two people earning identical $85,000 salaries can have take-home pay differences of $4,000 to $7,000 per year depending solely on which state they live in.

The rise of remote work has made state tax arbitrage more accessible than ever. Workers in high-tax states like California, New York, and New Jersey are relocating to no-tax or low-tax states like Florida, Texas, and Tennessee, effectively giving themselves a significant raise without changing jobs or employers.

However, state income tax is just one piece of the total tax puzzle. Some no-income-tax states compensate with higher property taxes, sales taxes, or fees. A true comparison requires looking at the complete tax burden. That said, for high earners, income tax is typically the dominant factor, making state choice a critical financial decision.

Use our State Tax Calculator to see exactly how much state income tax you owe based on your salary, filing status, and state of residence.

The Nine No-Income-Tax States

Nine states charge zero individual income tax, making them the most attractive for maximizing take-home pay from a pure income tax perspective:

Alaska stands out as uniquely favorable: not only does it have no income tax and no state sales tax, but it actually pays residents through the Permanent Fund Dividend (PFD), which was approximately $1,312 per person in 2024. Wyoming offers the lowest overall tax burden of any state when combining income, sales, property, and excise taxes.

These states fund government services through alternative revenue sources. Texas and New Hampshire rely heavily on property taxes (Texas has the 6th highest property tax rate in the nation). Washington and Tennessee lean on sales taxes. Nevada and Alaska benefit from tourism-related taxes and natural resource revenues.

For a worker earning $100,000, living in a no-income-tax state versus California saves roughly $5,800-$7,200 per year in state income taxes alone. Over a 30-year career, that difference compounds to $174,000-$216,000 in additional take-home pay. Calculate your specific savings with our Cost of Living Calculator.

Flat Tax States: Simple but Steady

Twelve states use a flat income tax rate, meaning every dollar of taxable income is taxed at the same percentage regardless of how much you earn. This simplifies tax calculations and creates predictability:

The trend toward flat taxes has accelerated in recent years. Arizona dropped from a graduated system to a flat 2.5% in 2023, making it one of the most tax-competitive states. Georgia transitioned to a 5.39% flat rate in 2024. Mississippi is phasing down to a flat 4% by 2026. Iowa and several others are in the process of flattening their tax structures.

For middle-income earners ($50,000-$100,000), flat-tax states with low rates like Arizona (2.5%), Indiana (3.05%), and Pennsylvania (3.07%) offer the best balance of predictable taxation with minimal impact on take-home pay. Use our Paycheck Calculator to model your exact paycheck in any flat-tax state.

Highest Tax States: Where You Pay the Most

Several states impose top marginal income tax rates exceeding 9%, significantly reducing take-home pay for higher earners. These states typically use progressive tax systems with many brackets:

California's 13.3% top rate is the highest in the nation. However, this rate only applies to income above $1 million. For a worker earning $100,000 in California, the effective state tax rate is closer to 5.8%, not 13.3%. The progressive structure means most workers pay far less than the headline top rate suggests.

Oregon deserves special attention because its top rate of 9.9% kicks in at just $125,000 for single filers, a much lower threshold than California or New York. This makes Oregon disproportionately expensive for middle-to-upper-middle income workers. Additionally, Oregon has no sales tax, meaning income tax is the primary revenue mechanism.

New York City residents face a particularly heavy burden: state tax (up to 10.9%) plus city tax (up to 3.876%) can push the combined rate above 14.7% for top earners, the highest combined state/local income tax rate in the country.

See how high-tax states reduce your paycheck compared to alternatives with our Salary Calculator.

Real Take-Home Pay Comparison: $80,000 Salary

Headline tax rates can be misleading. What matters is the effective rate you actually pay. Here is a comparison of estimated annual take-home pay for a single filer earning $80,000 across different states, accounting for the standard deduction and actual bracket calculations:

The difference between the best and worst cases is $7,224 per year, or $602 per month. That is the equivalent of a car payment, a significant addition to retirement savings, or a meaningful investment in personal development. Over a 30-year career, the cumulative difference exceeds $216,000 before accounting for investment returns on those savings.

Our Net Pay Calculator provides a detailed breakdown for any state, salary, and filing status so you can see your exact take-home pay.

Local Income Taxes: The Hidden Extra Layer

Several states allow cities and counties to levy their own income taxes on top of the state tax. These local taxes can add 1-4% to your total tax burden and are often overlooked when comparing states:

• New York City: 3.078% to 3.876% on top of New York State taxes (applies only to NYC residents)
• Philadelphia: 3.75% wage tax for residents (3.44% for non-residents who work in the city)
• Detroit: 2.4% for residents, 1.2% for non-residents working in Detroit
• St. Louis: 1% earnings tax for those who live or work in the city
• Ohio cities: Many cities charge 1.5-3% local income tax (Columbus 2.5%, Cleveland 2.5%, Cincinnati 1.8%)
• Maryland counties: All 23 counties and Baltimore City levy piggyback taxes from 2.25% to 3.2%
• Indiana counties: Local income taxes range from 0.5% to 3.38% depending on the county

Ohio is particularly noteworthy because its municipal income tax system is the most extensive in the nation, with over 600 municipalities levying local income taxes. A worker living in one Ohio city and working in another may owe taxes to both, though credits usually prevent double taxation.

Always check for local income taxes when evaluating a job in a new city. Our Salary to Hourly Converter helps you understand the true hourly value of your salary after accounting for all tax layers.

Remote Work and State Tax Implications

The explosion of remote work since 2020 has created complex state tax situations for millions of workers. The general rule is that you owe state income tax where you physically perform the work, but several important exceptions and complications exist.

The "Convenience of the Employer" Rule

Several states tax remote workers based on the employer's location, even if the employee works from another state. New York is the most aggressive, taxing remote workers who work for New York-based employers unless the remote arrangement is for the employer's "necessity" rather than the employee's "convenience." Connecticut, Delaware, Nebraska, and Pennsylvania have similar rules. This can create situations where a remote worker in New Hampshire (no income tax) owes New York state tax because their employer is headquartered in Manhattan.

Reciprocity Agreements

Some neighboring states have reciprocity agreements that prevent double taxation. If you live in New Jersey but work in Pennsylvania, for example, you only pay tax to your home state (New Jersey). Major reciprocity pairs include: Virginia/DC/Maryland, Illinois/Iowa/Kentucky/Michigan/Wisconsin, Pennsylvania/New Jersey, and several others. These agreements simplify filing and prevent workers from owing taxes to two states.

Strategies for Remote Workers

• Verify your employer does not have nexus in a high-tax state that could create tax obligations
• Track days worked in each state if you travel or split time between locations
• Consider establishing residency in a no-income-tax state if your employer supports fully remote work
• Consult a multi-state tax professional if your situation involves more than two states

Compare how different state choices affect your remote work income using our Contract vs Full-Time Calculator, which factors in state tax differences.

Total Tax Burden: Looking Beyond Income Tax

Comparing states solely on income tax tells an incomplete story. A state with no income tax may compensate with higher sales taxes, property taxes, or other fees. Here is how the overall tax burden compares when factoring in all major taxes:

• Lowest overall tax burden: Alaska (4.6%), Wyoming (6.4%), Tennessee (6.5%), South Dakota (6.7%), Florida (6.8%)
• Highest overall tax burden: New York (12.5%), Connecticut (12.3%), Hawaii (12.2%), Vermont (11.5%), California (11.4%)
• Surprises: Texas ranks 23rd overall despite no income tax because of its high property taxes. Washington ranks 28th due to high sales taxes. New Hampshire ranks 7th lowest despite high property taxes because it lacks both income and sales tax.

The key insight is that for high-income earners ($150,000+), income tax dominates the total tax burden, making no-income-tax states clearly superior. For lower-income earners, property taxes and sales taxes matter more, and the optimal state depends on individual circumstances like homeownership status and spending patterns.

Factor in cost of living alongside taxes with our Cost of Living Calculator to get the most complete picture of which states offer the best financial outcome for your situation. Also explore how inflation erodes your purchasing power with our Salary Inflation Calculator.

Frequently Asked Questions