State Tax - Tax Return, Tax Refund, Income tax...
 

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Understanding your state's specific taxes is an esential part of tax preparation. The state income tax is an income tax in the United States which is levied by each state individually. Some states choose not to impose an income tax. They are Texas, Washington, Florida, South Dakota, Nevada, Wyoming, and Alaska. Additionally, Tennessee and New Hampshire have a limit on their state income taxes (dividends and interest income only). As of 2005, the highest state income tax rate is that of Montana, at 11%. Of those states that enforce income tax, the lowest maximum rate is Illinois, which has a flat tax of 3%. Most states have a progressive income tax, Meaning the rate rises as one's income gets larger.

State income taxes are added to the federal income tax, which currently flattens out at 35%. Thus, the maximum total taxable rate is 35% of income in the states of Texas, Florida, and Nevada, but a 46% of tax rate in Montana and 44.3% in California.

In addition to this, some states allow individual cities to impose income taxes on top of the federal and state income taxes. New York CIty, for instance, has both a state income tax of up to 7.7% and a city income tax of up to 5.82%. Therefore, the maximum taxable rate in the city limits of NYC (as of 2005) is 48.52% (approximately 1/2 of marginal income).