State Income Taxes Explained: Your 2025 Guide

In the US, individual income is subject to both federal and state tax, along with (in some cases) charges imposed by local governments.

While federal laws apply to everyone, each state implements its own regulations when it comes to tax rates, tax return deadlines, specific tax credits, and other exemptions. For example, some states, such as Texas, collect no income tax at all, while others rely on flat rates (e.g., Arizona) or progressive systems (e.g., South Carolina).

Here, we have compiled an up-to-date roadmap of the current US tax regulations. This article covers fundamental concepts, federal and state-by-state tax rates for 2025, filing essentials, and what to keep in mind when it comes to personal property and capital gains.

How does federal tax work?

Federal income tax is collected by the Internal Revenue Service (IRS) and covers a range of earnings such as salaries, wages, bonuses, profits, investments, and winnings.

This income is taxed progressively, with tax burdens distributed across seven brackets that range from 10% up to 37%, depending on the size of earnings. Your specific tax rates also depend on your filing status, i.e. whether you are a single filer or filing as a married individual/head of household (see: ‘How to file for your income tax’ below for information on filing status).

2025 federal income tax rates

The following table will give you a breakdown of your appropriate federal tax bracket based on income size and status:

As taxpayers (individuals or business entities) enter a higher tax bracket, only the portion of income in that bracket is taxed at a higher rate. The table below shows an illustrative example of how tax is distributed across the various tax brackets, with the gross income in this example set at $105,000 (USD) for a taxpayer with single filer status.

2025 Federal income tax breakdown for $105,000 (Single filer example)

How do state taxes work?

Individual states also collect income tax from their residents, with policies varying substantially from one state to another. Some states do not tax their residents’ income, while others impose flat or progressive tax. State-by-state tax structures are in place as follows:

2025 State income tax structures by type

2025 State income tax rates and bracket ranges by filing status

Similarly to federal tax, state income tax rates depend on your filing status. Here is a full, state-by-state breakdown of your tax rate as determined by state regulations and filing status:

Note: States without a state income tax are marked as "N/A" for bracket ranges.

What is local income tax?

Local income taxes are levied by local authorities (town, city, or district) to raise funds for various public services and initiatives. These taxes differ significantly across the board, depending on funding gaps, policies, and more.

Examples of local taxes include regulations such the Los Angeles Property Tax and San Francisco Hotel Tax in California, or the Las Vegas Tourism Tax in Nevada.

You can find more information about the specifics on local government websites.

Standard and itemized deductions, tax credits, and personal exemptions

There are several important factors that could help you reduce your overall tax burden for both federal and state tax. These include whether you itemize or claim standard deductions, your eligibility for tax credits, and potentially being able to request personal tax exemptions.

Types of tax reductions

Your final tax owed will depend on your choice of standard deductions vs. itemized deductions, and the specific tax deductions and credits you might be eligible for. Some states might also offer tax exemptions to their residents, though this is currently not available on the federal level.

Standard deductions

This is the default scenario for taxpayers, which involves subtracting a fixed sum from your taxable income, with the size of the sum depending primarily on your family status (filing as an individual, jointly as a married couple, widow(er), or as head of household). This is the easiest scenario, as eligibility is automatic and no specific documentation is required by taxpayers to claim the deduction.

Itemized deductions

Itemized deductions require tracking expenses such as mortgages and medical expenses throughout the year to help lower your final taxable income.

Taxpayers who choose to itemize their deductions when filing for their federal tax returns might also be eligible for a State and Local Tax (SALT) deduction. This is a deduction of up to $10,000 on state and local taxes paid to governments, including personal property taxes (jurisdiction-specific taxes on vehicles, boats, etc.).

Tax credits

These are tax breaks that are directly subtracted from the final tax liability (e.g., child credits). You can find out more about specific tax credits in the next section.

Personal exemptions

Unlike tax credits, personal exemptions are subtracted from a taxpayer’s gross income and depend on your status and number of dependents. Since 2017, taxpayers’ federal tax exemptions have been set to $0. To find out if your state offers any personal exemptions, please consult a tax specialist.

How do deductions on state income tax work?

Different states have their own regulations on state tax deductibles, with limitations or additional benefits that taxpayers can claim.

For example, California and Minnesota allow higher caps on mortgage interest deductions. Meanwhile, a more generous upper limit is given to medical expenses in states like Connecticut, Oregon, and Virginia. In New York, college tuition is tax deductible.

You can find more information about the regulations in your state on the official state tax department website.

What tax credits are offered by different states?

The federal government offers a range of tax credits for taxpayers with limited earnings, families with dependents, those with a Head of Household status, and students. In addition to these federal credits, states and local governments also offer tax credits to their residents, based on various policies and priorities.

Earned Income Tax Credit (EITC)

This is one of the most beneficial tax credits, which aims to assist low and moderate-income taxpayers whose income is below a certain threshold. It is offered at a federal, state, and local level and is fully refundable, which means taxpayers are entitled to a full refund if the credit exceeds the tax owed. Visit the IRS website for a full breakdown of states that offer EITC tax credit benefits.

Child tax credits

Many states also provide Child Tax Credits, aimed at improving the financial security of families with children. These credits directly lower income tax burden and are sometimes refundable.

Similarly, a number of states offer Child and Dependent Care Credits to working parents and caregivers. This benefit helps offset childcare costs by allowing income tax break on related expenses (daycare, babysitters, after-school programs, etc.).

Additional tax relief

In addition to credits that provide social assistance, residents of certain states can take advantage of additional tax reliefs. For instance, in the jurisdictions of Minnesota and Michigan, low-income taxpayers can claim property tax credits, while Missouri offers credits on some pension benefits.

How to file for your income tax

Most taxpayers file Form 1040 for federal income tax returns, and each state that collects state income tax also has its own tax return form (e.g., IL-1040 for Illinois, PA-40 for Pennsylvania, etc.).

When filing your tax return form, you should indicate your filing status:

• Single: Unmarried or separated/divorced individuals who do not qualify for Head of Household or Qualifying Window(er)
• Married Filing Jointly (MFJ): Where you and your spouse report your combined income and relevant deductions and credits on state or federal income
• Married Filing Separately (MFS): Spouses report their individual income, relevant deductions, and credits separately
• Head of Household: Unmarried individuals with dependents
• Qualifying Widow(er) with Dependent Child: Widowed persons who have dependent children and meet certain criteria

For both federal and state income taxes, non-single taxpayer statuses typically benefit from higher standard tax deductions and wider tax brackets, reducing the overall tax burden on the filer. However, different states offer varying degrees of tax relief for non-single statuses, with different specific deductions and tax brackets (see: tables in previous sections).

What is the deadline for submitting my tax return form?

Federal income tax returns must be filed by April 15 every year. You can file for an extension via Form 4868, which will automatically provide you with 6 months (until October 15) to complete your tax return form. Taxes owed must still be paid by the original date (April 15), otherwise, you could incur penalties.

State taxes work similarly. Most states have the same tax return deadline as the federal government (April 15). The following states are exceptions to this rule:

• Hawaii (April 20)
• Delaware (April 30)
• Iowa (April 30)
• Virginia (May 1)
• Louisiana (May 15)

Extensions are typically provided to areas that are impacted by natural disasters, such as storms or floods.

Some states will grant you an automatic six-month extension upon completion of Form 4869 for an extension on your federal income tax. However, this is not always the case.

You may need to contact your local authorities or visit your state’s tax department website to find out and complete the correct documentation. For example, in New York, this will be Form IT-370 for a personal income extension, while in the state of Massachusetts, you’d be completing Form M-4868.

How long would it take to get my tax refund?

The IRS will typically issue you a tax refund within 21 days of you filing an electronic tax return documentation, and 6 weeks if the tax return was mailed.

For refunds on state income tax, the timespan varies. The Massachusetts government website lists a 4-6 week wait for e-returns, and 8-10 for paper returns, whereas the New York website cites 1 week for digital applications and three weeks for non-digital ones. For specific information on your state’s guidelines, refer to your local tax department website.

Capital gains, property tax, and other considerations

Apart from regular income taxes, the federal government, states, and local authorities collect various other levies based on taxpayers’ capital gains, property ownership, and more. Here, we’ve summarized the most important types of charges you should be aware of.

What are the differences between federal vs. state capital gains tax?

Capital gains are defined as the profit made by selling an asset (such as stock, estate, or investments) that has increased in value over time. These are subject to short-term capital gains tax (when the asset was held for one year or less) and long-term capital gains tax (when held for more than one year) by the IRS, and should be reported in Form 1040.

Short-term capital gains are taxed like regular income (based on your federal tax bracket, between 10-37%).

Long-term capital gains are taxed by the federal government at 0%, 15%, or 20% depending on the filer’s status and the full amount of that taxpayer’s taxable income.

States also levy a tax on capital gains as follows:

2025 Capital gains tax by state

How is personal and real property taxed?

Personal property is tangible property that produces income (is used for business purposes), while real property is immovable property, such as buildings and land.

The federal government does not impose tax on personal and real property. The majority of property taxes are imposed by local governments and depend on where you live, as well as the assessed value of the property. Each jurisdiction sets its own tax rates based on this assessed value. You can find out more information by contacting your local government.

Other state taxes to be aware of when managing your finances

States levy a number of additional state taxes that you will need to be aware of. The information below is not an exhaustive list of the different taxes that may be collected by your state and local governments:

• Sales tax: General (on goods and services) and special sales tax (e.g., on luxury items)
• Excise tax: Focused on particular goods or services such as gasoline, tobacco, and alcohol
• Tourism taxes: Tax on hotels, entertainment parks, and more
• Green tax: Tax on carbon emissions, pollution, and other factors
• Healthcare tax: Tax on specific healthcare insurances, products, and services
• Inheritance tax: Tax on estates and wealth from deceased relatives

For more information about the specific taxes imposed by your jurisdiction, refer to your state on the official state tax department website.

Next steps

Understanding and managing your taxes according to your specific state and local government legislation can be challenging, but luckily there are steps you can take to make it easier on yourself.

• Stay informed: Review your state’s 2025 rates and regularly visit the federal, state, and local government websites
• Don’t miss deadlines: Set reminders in your calendar for important dates
• Get advice: Use a tax calculator for your respective state and/or contact a tax advisor or accountant
• Get updates: Sign up for email notifications or newsletters, or subscribe to your relevant tax authorities on social media
• Stay ahead: File early to avoid delays in your tax refund

Simplify US tax for yourself and your team

With Deel, you can manage payroll and benefits for all your US teams, all in one place. We ensure you stay compliant with federal, state, and local regulations across all 50 states, while enjoying full visibility and control over tax calculations and deductions, as well as 24/7 client support.

Our Deel PEO service provides a comprehensive system for managing every aspect of your employee HR and administrative needs—from onboarding to documentation, HR services, compensation management, and access to the top benefits providers.

Find out how you can simplify your payroll and HR processes with one single platform. Book a 30-minute demo with us.