Tax · Income Tax
Federal and state income tax — who taxes what
You can be taxed twice on the same income: once by the IRS, once by your state. A handful of states levy no income tax at all, which is why the same salary goes further in some places.
In the United States, income tax is layered: the federal government takes a cut, your state takes a cut, and in some cities, your city takes a cut too. Your total tax bill depends on where you live and work, not just how much you earn. Understanding this layered system is crucial to budgeting accurately and avoiding surprises when tax time arrives.
Federal income tax — the same everywhere
Federal income tax is collected by the Internal Revenue Service (IRS) and applies to all U.S. residents regardless of where they live. In 2026, the federal system uses seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The amount you owe depends on your income level and filing status (single, married filing jointly, head of household, etc.). These brackets adjust each year for inflation, and the IRS published 2026 thresholds in October 2025. For example, a single filer reaching the 37% top rate would have taxable income above $640,600.
Federal tax uses a progressive system, meaning you don't pay the highest rate on all your income—only on the portion that falls within each bracket. If you earn $70,000 as a single filer, the first $12,400 is taxed at 10%, the next amount up to $50,400 is taxed at 12%, and the remainder at 22%. You pay blended tax, not one rate on everything. This same logic applies to state and city taxes as well.
State income tax — huge variation
State income tax is where things get complicated. Nine states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—levy no income tax on wages at all. In those states, you still owe federal tax, but you skip state income tax entirely. This is a major financial advantage, especially for high earners.
The remaining 41 states and Washington, D.C. all have state income tax, but the rates and structures vary widely. Some states use graduated brackets (like New York, with rates from 4% to 10.9%), while others use a single flat rate (like Illinois, Michigan, and Pennsylvania). Your state determines your state tax bracket, deductions, credits, and filing requirements. This is why the same $100,000 salary can result in very different take-home pay in different states.
If you're relocating or choosing where to work, compare state income tax rates carefully. However, remember that states without income tax often compensate through higher sales tax, property tax, or other levies, so total tax burden is not always lower even in zero-income-tax states.
How to find your state's rates
The best place to find your state's income tax brackets and rates is your state's Department of Revenue or Taxation website. Search for 'your state' plus 'income tax brackets 2026.' Some commonly referenced high-tax states include California (top rate 13.3%), New York (10.9%), and New Jersey (10.75%), while lower-tax states with income taxes include Colorado (4.4% flat), South Dakota (no income tax), and Arizona (2.5% flat).
City income taxes — the famous example is New York City
On top of federal and state tax, some cities and municipalities impose their own income tax. The most well-known is New York City, which collects a resident income tax on top of the state of New York's tax. New York City residents pay an additional 3.078% to 3.876% depending on income level. So a New York City resident earning $100,000 might owe federal tax plus New York State tax plus New York City tax—three separate tax obligations on the same income.
Whether your city has income tax is crucial to know. If you live outside New York City but commute into the city for work, you do not pay New York City income tax; you pay tax to your home state instead. Other cities and local jurisdictions also may impose income tax, but coverage and rates vary by location. Always check your specific city and county's tax office website.
Moving states mid-year — you file in both
If you move from one state to another during a calendar year, you will typically need to file a part-year resident tax return in both your former and new states. Part-year resident returns allow you to report only the income earned (or residency period) while you lived in each state.
Here is how it generally works: Your new state of residence taxes all income you earn while you live there, regardless of where the work is performed. Your old state of residence taxes only the income you earned while you lived there. Income from interest, dividends, and pensions is typically attributed to your state of residence at the end of the year. Some states consider you a full-year resident if you spend at least 183 days there, even if you moved late in the year. Rules vary by state, so check your specific state's residency definition before filing.
The good news: federal law prevents two states from taxing the same income. If both states tax you, the state where you actually lived as a resident will usually grant you a credit for taxes paid to your former state on the same income, so you don't pay double. Still, tracking income and filing two separate state returns is time-consuming and error-prone. Many immigrants and people new to the U.S. hire a tax professional (CPA or enrolled agent) to handle multi-state returns.
Special case: moving from a no-income-tax state
If you move from a state with no income tax (such as Texas or Florida) to a state with income tax (such as California or Massachusetts), you will owe state tax in your new state starting from your move date. Your former state will not claim tax on your prior-year income if you were a resident then. If you move in the opposite direction, you may be able to claim a break from state income tax once you establish residency in your new no-tax state.
How to file and avoid mistakes
When filing federal taxes, use IRS Form 1040 (or equivalent), which is the same for all taxpayers. Your filing deadline is typically April 15 of the year after you earned the income. For state taxes, each state has its own forms and deadlines; most align with April 15, but a few differ. You file state returns separately from your federal return.
On your W-2 (wage form from your employer) or 1099 (self-employment form), your employer or client reports the income and any federal and state taxes already withheld. Compare what was withheld to what you owe based on the tax brackets. If too much was withheld, you get a refund; if too little, you owe money. Keep all W-2s and 1099s until after you file.
Common mistakes include: failing to file in all states where you earned income, miscalculating residency status, forgetting to report out-of-state income, and not accounting for city taxes. If you earned income in multiple states, file part-year resident returns in each. If you are self-employed or a freelancer working across state lines, this becomes even more critical.
Key takeaways
- Federal tax is the same nationwide; all income earners owe it to the IRS.
- State income tax varies: nine states have no income tax, others range from flat rates to progressive brackets reaching 14%.
- Some cities (like New York City) add their own income tax on top of state and federal tax.
- If you move states mid-year, you file part-year resident returns in both states and typically avoid double taxation through state credits.
- Your employer withholds an estimate of your federal and state taxes from each paycheck; you reconcile at filing time.
- Always check your specific state and city tax rules—do not assume a nationwide rule applies to you.
Keep reading — Income Tax
Filing a US tax return — forms and deadlinesReturns are normally due by 15 April for the previous calendar year. Employees get a W-2; contractors and freelancers get 1099s and must set their own tax aside — nobody withholds it for them.
Tax residency, the substantial presence test and treatiesYour immigration status and your TAX status are different things. The substantial presence test can make you a US tax resident — taxed on worldwide income — even on a temporary visa.
The ITIN: how to file taxes when you can't get an SSNNo SSN doesn't mean no tax obligations. The IRS issues an Individual Taxpayer Identification Number (ITIN) so you — and a spouse or dependents — can file. It's a tax number only, not work permission.