State and Federal Taxes
See how your state income tax works alongside federal tax and where the two systems connect.
TL;DR
- File a
federalreturn with the IRS and astatereturn separately. - Know whether your state uses a
flatTax,progressiveTax, or no tax. - Start most state returns from your federal
AGI, then adjust.
Two Separate Systems
Two ReturnsMost people file one federal return and one state return.
Federal to the IRS, state to the stateFederal RulesOne set of brackets and deductions applies in every state.
10% to 37%, same nationwideState RulesEach state sets its own rates, deductions, and credits.
0% to 13.3%, varies by stateSame Deadline, UsuallyMost state returns are due the same day as federal.
Most states: April 15, 2027How States Tax Income
No Income TaxNine states do not tax wages at all.
AK FL NV NH SD TN TX WA WYFlat TaxOne rate applies to all taxable income.
Example: Illinois 4.95%Progressive TaxRates rise with income, like the federal brackets.
Example: California 1% to 13.3%Other Taxes Fill InNo-income-tax states often charge more in sales or property tax.
Compare total tax, not one lineWhere They Connect
Starts From Federal AGIMost state returns begin with a number from your federal return.
Federal AGI -> state starting pointState AdjustmentsStates add back or subtract items their law treats differently.
Most states skip Social SecuritySALT DeductionState taxes can reduce federal tax only if you itemize.
Up to $40,400 in 2026Taxable State RefundA state refund is federal income if you itemized last year.
Itemized? Refund is on Form 1099-GPlan for Both
Withhold for BothMany states have their own withholding form besides the W-4.
Pay stub shows federal + stateEstimated PaymentsSide income often needs quarterly payments to both.
Pay IRS and state each quarterMoving MidyearYou split the year's income between your old and new states.
Two part-year state returnsRetirement IncomeMany states exempt some pension or retirement income.
Check before you plan a moveTips
- Use tax software that carries your federal numbers into your
statereturn, so you enter everything once and avoid mismatches. - Add your state's tax to your federal
effectiveRatewhen budgeting; the combined number is what you really pay.
Warnings
- Setting up only federal withholding can leave you owing your
state; check that each paycheck shows both lines. - Do not assume a federal rule applies to your
state; many states treat retirement income, depreciation, and deductions differently.
In Practice
Add a simple flat state tax to your federal bill to see your true total and how much location matters.
You are single, earn $70,000 in 2026, and live in a state with a flat 5% tax on all wages (kept simple, with no state deduction).
- Federal taxable income: $70,000 - $16,100 = $53,900.
- Federal tax: $1,240 + $4,560 + ($3,500 x 22%) = $6,570.
- State tax: $70,000 x 5% = $3,500.
- Combined: $6,570 + $3,500 = $10,070, or 14.4% of your pay.
- In a no-income-tax state, you would owe just the $6,570.
Your total income tax is $10,070, with $3,500 going to the state.
Your real income tax rate is federal plus state, so always count both.
FAQ
Federal income tax is collected by the IRS under one set of rules nationwide, with rates from 10% to 37%. State income tax is collected by your state's revenue department under its own rates, deductions, and credits. Most people file two separate returns each year.
No. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax wages. Residents still owe federal income tax, and those states often lean more on sales or property taxes instead.
Most states begin with your federal adjusted gross income, or AGI, then add or subtract items their law treats differently. Common subtractions include Social Security, which most states do not tax, and some pension income. That is why you usually finish the federal return first.
Only if you itemize. State and local income or sales tax plus property tax can be deducted up to the SALT cap, which is $40,400 for 2026. If you take the standard deduction, state taxes give you no federal benefit.