Income tax in the United States is both federal and state. The federal government taxes the income of everyone who earns above a minimum threshold, no matter where in the country they live. On top of that, most states levy their own income tax, and a handful of cities, counties, and school districts add a third layer. Nine states charge no personal income tax at all, but even residents there still owe the IRS.
The Federal Layer
Federal income tax applies to every U.S. resident earning above a minimum threshold, regardless of state. Congress’s authority comes from the Sixteenth Amendment, which allows a tax on income “from whatever source derived.”1Congress.gov. U.S. Constitution – Sixteenth Amendment The specifics live in the Internal Revenue Code (Title 26 of the U.S. Code),2Internal Revenue Service. Tax Code, Regulations and Official Guidance and the IRS administers it under IRC Section 7801.3Internal Revenue Service. The Agency, its Mission and Statutory Authority
The federal system is progressive, with seven brackets. Each additional dollar you earn is taxed only at the rate for the bracket it falls into, not at that rate on your whole income. For the 2026 tax year, single filers face these rates:4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10% on income up to $12,400
- 12% on $12,401 to $50,400
- 22% on $50,401 to $105,700
- 24% on $105,701 to $201,775
- 32% on $201,776 to $256,225
- 35% on $256,226 to $640,600
- 37% above $640,600
You report income to the IRS on Form 1040.5Internal Revenue Service. About Form 1040, U.S. Individual Income Tax Return Whether you actually owe anything depends heavily on the standard deduction, which for 2026 is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 If your gross income falls below the threshold that applies to you and no special circumstances kick in, you generally don’t have to file at all.6Internal Revenue Service. Check if You Need to File a Tax Return
The State Layer
Most states run their own income tax alongside the federal one, and the two systems are entirely separate. Each state legislature sets its own rates, brackets, deductions, and credits. Some states use a progressive structure similar to the federal model; others charge a flat percentage on all taxable income. State revenue departments collect, audit, and enforce their taxes independently of the IRS.
That said, most state systems piggyback on federal calculations. About 31 states and the District of Columbia use federal adjusted gross income as the starting point for the state return, and another five use federal taxable income.7Tax Policy Center. How Do State Individual Income Taxes Conform With Federal Income Taxes Once you have your federal figures, most of the work for the state return is done. States then layer on their own adjustments. A deduction the IRS allows may not exist at the state level, and states sometimes offer credits the federal government doesn’t.
Rates vary widely. Some flat-tax states charge below 3 percent, while top brackets in the highest-tax states climb above 13 percent. That range is why a move across state lines can noticeably change your tax bill even with the same salary.
The Nine States With No Income Tax
Nine states impose no personal income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire joined the group after repealing its tax on interest and dividend income effective January 1, 2025.8New Hampshire Department of Revenue Administration. Repeal of NH Interest and Dividends Tax Now in Effect
Washington needs an asterisk. It doesn’t tax wages or salary, but it imposes a 7 percent tax on long-term capital gains above a substantial deduction threshold.9Washington Department of Revenue. Capital Gains Tax Sell stock or a business interest at a large profit while living there and you’ll owe state tax on the gain, even though your paycheck stays untouched.
Living in a no-income-tax state doesn’t put you outside state taxation. These states typically make up the revenue through higher sales taxes, higher property taxes, or specialized levies like severance taxes on natural resources. And none of it changes what you owe the IRS. Federal tax follows you wherever you live in the country.
A Possible Third Layer: Local Income Taxes
Roughly 16 states authorize cities, counties, or school districts to impose their own income-based taxes. Local income taxes are most common in parts of the Midwest and Northeast, where metropolitan areas and school districts have long funded local services this way. Rates are usually modest, often 1 to 4 percent, but stacked on top of federal and state tax they add up.
Local taxes are typically withheld from your paycheck, so you may not see a separate bill. Things get complicated when you live in one jurisdiction and work in another. Some localities tax based on where you physically work, others based on where you live, and sometimes both places want a share. Credits or offsets can reduce double taxation, but not always, and sorting it out is on you.
Where the Federal and State Systems Meet: The SALT Deduction
If you pay state and local income taxes, you can generally deduct them on your federal return when you itemize. This is the state and local tax deduction, known as SALT, and it’s the main point where the two systems intersect. For 2026, the deduction is capped at $40,400 for most filers.10Office of the Law Revision Counsel. 26 USC 164 – Taxes That cap covers the combined total of state and local income taxes and property taxes.
The cap phases down for higher earners. Once modified adjusted gross income exceeds $505,000 in 2026, the $40,400 limit shrinks by 30 cents for every dollar above that threshold and eventually bottoms out at $10,000.10Office of the Law Revision Counsel. 26 USC 164 – Taxes Married individuals filing separately get half these amounts. The phasedown means the expanded cap mostly benefits middle- and upper-middle-income taxpayers in high-tax states. Earn well above the threshold and you’re effectively back to the old $10,000 limit.
The SALT deduction only helps if you itemize. If your total itemized deductions don’t clear the standard deduction ($16,100 single, $32,200 joint in 2026), taking the standard deduction is the better move and the SALT cap is beside the point.
Which State Actually Taxes You
Where you owe state income tax isn’t always obvious, especially if you split time between states or work remotely. Most states treat you as a resident if you’re domiciled there, meaning it’s your permanent home and the place you intend to return to. Many states also treat you as a statutory resident if you spend more than 183 days there in a year, even if you consider somewhere else home.
Live in one state and commute to another, and both may have a claim on your income. About 16 states have reciprocity agreements with neighbors that stop this from happening on wages. Under a typical reciprocity agreement, you owe income tax only to your home state, and your employer withholds accordingly. These agreements generally cover wages and salary only. Investment income or self-employment earnings may still be taxable in both states.
Remote work adds another wrinkle. A few states tax employees based on the location of the employer’s office, not where the employee actually sits. If you live in one state but your company is headquartered in one of those states, you could owe tax there without ever setting foot in the office. Check the specific rules before taking a remote position across state lines.
If You Live Abroad
Moving overseas doesn’t end your federal obligation. The United States is one of the few countries that taxes based on citizenship rather than residence, so U.S. citizens and green card holders owe federal income tax on worldwide income regardless of where they live. Two provisions blunt the impact. The foreign earned income exclusion under IRC Section 911 lets qualifying taxpayers exclude up to $132,900 of foreign wages from federal taxable income for the 2026 tax year,11Internal Revenue Service. Figuring the Foreign Earned Income Exclusion provided you meet either a physical presence test or a bona fide residence test. The foreign tax credit is a separate path that offsets U.S. tax with taxes already paid to another country, which prevents true double taxation in most cases.