US State Tax Return
In general, states take one of three approaches to taxing residents and/or workers:
– They don’t tax income at all.
– They impose a flat tax. That means they tax all income, or dividends and interest only in some cases, at the same rate.
– They impose a progressive tax. That means they tax higher levels of income at higher rates.
If, like most people, you live and work in the same state, you probably need to file only one state return each year. But if you moved to another state during the year, lived in one state but worked in another or have, say, income-producing rental properties in multiple states, you might need to file more than one. And because the price of most tax software packages includes preparation and filing for only one state. Filing multiple state income tax returns often means paying extra.
States with no income tax
Seven states currently don’t tax most income earned there:
– South Dakota.
State income tax rates tend to be lower than federal tax rates. Many range between 1% and 10%. Some states tax as little as 0% on the first few thousand dollars of income.