English 
Português 
Español 
For those planning to live in the United States, choosing the right state is as strategic a decision as choosing the right visa type. The American flag is one, but each state is its own tax jurisdiction, with tax rules that can mean differences of tens of thousands of dollars per year in the same family’s budget. Understanding this mechanism before signing a lease or accepting a job offer is an essential part of a well-planned immigration process.
This guide breaks down the American income tax system into two layers – federal and state -, shows the nine states that do not levy state income tax on earned income, lists the updated federal brackets for tax year 2025 (filed in 2026), and offers the critical perspective that a low tax burden does not always mean a lower cost of living.
How the American Income Tax System Works
The US income tax system operates at up to three levels: federal, state, and in some cases, municipal. Every tax resident – including green card holders and those who meet the substantial presence test – is required to report worldwide income to the Internal Revenue Service (IRS). State tax obligations depend on tax domicile, and some major cities (New York, Philadelphia, San Francisco, among others) also levy a local income tax.
Federal logic is progressive and structured in tax brackets: each income range is taxed at a distinct rate, and moving to a higher bracket applies only to the amount exceeding the previous threshold. Someone earning $50,000 per year does not pay 22% on all of it, but rather 10% on the first bracket, 12% on the second, and 22% only on the portion exceeding $48,475.
Federal Tax Rates for Tax Year 2025
The IRS adjusted the tax brackets for 2025 (return filed in 2026) based on inflation. For single filers, the schedule is as follows:
- 10%: up to $11,925
- 12%: from $11,926 to $48,475
- 22%: from $48,476 to $103,350
- 24%: from $103,351 to $197,300
- 32%: from $197,301 to $250,525
- 35%: from $250,526 to $626,350
- 37%: above $626,350
For couples filing jointly (married filing jointly), the thresholds approximately double. The 2025 standard deduction is $15,000 for single filers and $30,000 for couples – a figure that reduces taxable income before the brackets are applied.
The Nine States With No Income Tax
In 2026, nine states do not charge state income tax on earned income:
- Alaska
- Florida
- Nevada
- New Hampshire – eliminated in 2025 its former limited tax on interest and dividends, becoming fully exempt
- South Dakota
- Tennessee
- Texas
- Washington – does not tax wages, but maintains a tax on capital gains for higher income brackets
- Wyoming
This absence comes at a cost. States without income tax offset their revenue through other channels: higher sales tax (Tennessee reaches combined rates near 10%), high property tax (Texas is a classic case, with annual rates on property values among the highest in the US), and taxes on specific services. The net effect on a household budget depends far more on a family’s spending profile than on “no-tax state” marketing.
The States With the Highest Tax Rates
At the other end of the map are jurisdictions with high progressive rates and broad tax bases. Benchmarks for high state income taxation in 2026 include:
- California – top rate of 13.3% for incomes above $1 million (with a 1% mental health surcharge, totaling 14.4% at the top)
- New York – top state rate of 10.9% for incomes above $25 million; in New York City, a city tax of up to 3.876% is added
- Hawaii – top rate of 11%
- New Jersey – top rate of 10.75%
- Oregon – top rate of 9.9%, with no state sales tax
- Massachusetts – flat rate of 5%, with a 4% surcharge on incomes above $1 million (the so-called millionaire tax)
- Minnesota – top rate of 9.85%
Those planning a career in finance, technology, or medicine need to run the numbers carefully: a $250,000 salary in San Francisco yields, after taxes, an amount close to a $200,000 salary in Austin or Miami, even before factoring in housing costs.
Progressive, Flat, and Zero Models
US states fall into three groups based on their state income tax design:
- Progressive: most states that levy income tax adopt brackets similar to the federal model, with increasing rates as income rises. This group includes California, New York, Oregon, Minnesota, and most northeastern states.
- Flat tax: some states apply a single rate regardless of income. Massachusetts (5% plus the millionaire surcharge), Pennsylvania (3.07%), Illinois (4.95%), Colorado (4.4%), Indiana (3%), Kentucky (4%), Michigan (4.25%), North Carolina (4.5%), and Utah (4.55%) follow this model. Iowa shifted to a flat tax of 3.8% in 2025; Georgia is moving toward a flat rate by 2026.
- No income tax: the nine states already listed.
Absolute Tax Burden vs. Share of Income
Comparing states only by the average amount paid per resident is a misleading shortcut. What really matters is the total tax burden – the sum of income tax, property tax, sales tax, and local levies – as a proportion of salary and regional cost of living.
Analyses by the Tax Foundation, the Tax Policy Center, and the U.S. Bureau of Economic Analysis show a consistent pattern: states like New York, Connecticut, California, Hawaii, and Maryland carry the highest total tax burden as a share of income, while Alaska, Tennessee, Wyoming, and New Hampshire rank among the lowest. But Texas, often marketed as a tax haven, typically lands in the middle third once property taxes are factored in.
Where the Balance Lies
Low taxes are not always a real advantage. High-tax states tend to invest more heavily in public education, transportation, subsidized healthcare, and public safety. The difference can show up in private school tuition (in states with weak public education systems, families can end up paying $25,000 to $60,000 per year per child in private school), more expensive health insurance plans, and private transportation costs.
High-tax states like Massachusetts, Maryland, and New Jersey repeatedly appear at the top of public school quality rankings. Low-tax states such as Mississippi, Louisiana, and West Virginia tend to appear at the bottom of the same lists – a signal that part of the tax savings converts into private out-of-pocket expenses to fill gaps in public services.
How Taxes Influence Immigration Decisions
For those in the planning phase, the tax variable needs to be weighed alongside visa strategy. Some concrete decisions where tax domicile matters:
- Choice of state of residence: high-income professionals can save five or six figures per year simply by relocating from California to Texas while maintaining remote work.
- Salary offer structure: employers in high-tax states frequently offer higher nominal salaries; the correct comparison is always net of tax.
- EB-5 investment: investors can optimize the location of holdings and family residences by considering both federal tax rules and state-level rules.
- Retirement planning: some states partially or fully exempt retirement income (Pennsylvania, Mississippi, and Illinois exempt qualified pensions), which completely changes the calculation for pre-retirement immigrants.
- Children’s education: in states with weak public school systems, a significant share of the family budget may go toward private school – which can make a “zero-tax” state more expensive than a medium-tax state.
Filing Requirements
The American tax season runs from late January through April 15. Virtually every tax resident must file Form 1040 with the IRS, even if income falls below the taxable minimum – because credits such as the Earned Income Tax Credit and the Child Tax Credit are only refunded through a filed return. States that levy income tax require a state return parallel to the federal filing, generally with the same deadline.
Even in states with no income tax, residents are still required to file a federal return. Those who lived in more than one state during the tax year may need to file partial state returns in each jurisdiction – a common pitfall for those who relocate coast to coast in pursuit of new opportunities.
Income taxes in the United States are, ultimately, part of the complete cost-of-living equation. Looking at the nominal rate without considering property taxes, sales taxes, housing costs, public service quality, and professional opportunities is a skewed analysis. The smart choice comes from seeing the full picture – and from understanding that, in a country of 50 tax jurisdictions, the difference between an informed decision and a hasty one can be worth years of savings.
Victoria Harper
Editor-in-Chief
Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.
