Personal Income Tax laws

If you live in Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming, you may not be aware that most of the rest of the country has to file two tax returns every April. Every other state, aside from these lucky seven, requires income tax—over and above federal taxes—from its citizens.

Deductions and exemptions available to the taxpayer can be very detailed and vary greatly from state to state. Because of their number, no attempt has been made here to list them. "As an example, Missouri claims one of the more unusual deductions: fair market value of literary, musical, scholarly, or artistic composition contributed by creator to nonprofit tax-exempt entity (with written appraisal attached), less federal deduction taken" (Source, State and Local Taxes, vol. 2. RIA). The nature of various deductions can change fairly quickly to respond to various social, historical, and political events. For example, for several years starting in the early 1990s, there was a provision to exempt all income of estates of individuals who perished in Operations Desert Storm and Desert Shield.

Even though the trend for the last several years has been to lower taxes, an occasional state has dared to raise their rates. For example, until recently North Dakota had led the states with a rate of 12 percent on income over $50,000, but their rate now tops out at 5.54 percent of income over $319,000! On the other hand, Oklahoma used to have an average top rate of 6.75 percent of income over $20,000 and now taxes income over $240,000 at 10 percent. Most rates in the higher brackets are in the 5 percent to 8 percent range. However, Rhode Island and Vermont tax at rates of up to 25% and 24%, respectively, but the percentages are applied to the total federal tax liability and are not applied directly to the taxpayer's income.

Ohio ($200,000), Wisconsin ($155,850), New Jersey ($150,000), and Minnesota ($102,030) have the highest income brackets. The intent here is clearly to have the rich pay taxes at higher rates and shoulder more of the load for maintaining the revenue base; a pragmatic view, however, is that higher brackets protect those in the middle from the higher rates at the top. Most states have an upper bracket that is below $60,000.

Six states (and the District of Columbia) have had their income tax schemes challenged in court: Delaware, Illinois, Michigan, Nebraska, Ohio, and Oklahoma. All of these tax codes have been "certified" constitutional by federal courts.

The chart in this chapter deals only with the general principles of state personal income tax. The tax tables are accurate but are very much consolidated and generalized in order to give the reader a broad basis for comparison. The rates listed are, for the most part, for married couples filing jointly or for heads of households. Where this is not the case, the rate is noted. Slightly different rates and tables will apply in most states for couples filing separately or for single individuals. Also, there are countless deductions and exemptions available to the taxpayer that are similar to those available in the federal income tax code. Included here are only the general deductions and exemptions for determining state taxable income. See your state codes or the code of the state in which you are interested for detailed information.

Table 45: Personal Income Tax

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
ALABAMA	40-18-1, et seq.	Resident natural persons, fiduciaries, estates and trusts, and nonresidents receiving income from property owned or business transacted in the state	First $500, 2%; Next $2,500, 4%; Over $3,000, 5% (for a single person)	Yes	Yes
ALASKA	Income tax repealed 1/1/79, Alaska Laws 1980, 2d Sp. Sess. §9, ch. 2	Individual may file at his or her option to obtain certain tax credits for political donations or expenses for household and child care necessary for employment. Credit allowed only if legislature appropriates money. (§43.20.013)	N/A	N/A	N/A
ARIZONA	43-1011, et seq.	All Arizona residents and nonresidents that derive income from activity or ownership of property within the state; Partnerships are not taxable	First $20,000, 2.87%; Next $29,999, 3.2%; Next $49,999, 3.74%; Next $199,999, 4.72%; Over $300,000, 5.04%	No	Yes
ARKANSAS	26-51-201, et seq.	Resident individuals, estates and trusts, and nonresidents deriving income from local property or activity; Partnerships are not taxable	First $2,999, 1%; Next $3,000, 2.5%; Next $3,000, 3.5%; Next $6,000, 4.5%; Next $10,000, 6%; $25,000 or over, 7%; general rate for all taxpayers; special reduced rates available for low income	No	No
CALIFORNIA	Rev. & Tax Code §§17041, et seq.	Resident persons, including estates and trusts; nonresidents and part-year residents are liable for prorata share	First $11,924 1%; Next $16,342, 2%; Next $16,346, 4%; Next $17,318, 6%; Next $16,336, 8%; Over $78,266, 9.3%	No	Yes
COLORADO	39-22-104, et seq.	Every individual, estate, and trust that is required to file federal return; non- and part-year residents are liable for pro-rata share; Partnerships are not subject to tax	4.63% of federal taxable income; general rate for all taxpayers; alternative rates may apply	No	Yes
CONNECTICUT	51, et seq., act 3, Laws (1991), 1st sp. sess. Act 160, Law 1995 §12-700, et seq.	Each resident individual, trust, and estate with Connecticut taxable income; Nonresident individuals, estates, and trusts on Connecticut income	First $10,000, 3%; 4.5% above $10,000	No	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
DELAWARE	Tit. 30 §1102, et seq.	Individuals, estates, and trusts with Delaware taxable income; Residents and nonresidents of Wilmington are subject to an additional tax of 1.25% on all wages, salaries, commissions, and net profit	First $2,000, no tax; Next $3,000, 2.2%; Next $5,000, 3.9%; Next $10,000, 4.8% Next $5,000, 5.2% Next $35,000, 5.55%; Over $60,000, 5.95%	No	Yes
DISTRICT OF COLUMBIA	47-1806.01, et seq.	Any individual domiciled in the district, any resident of 183 days or more, and estates and trusts	First $10,000, 5%; Next $20,000, 7.5%; Over $30,000, 9% (for 2004 tax year); First $10,000, 4.5% Next $30,000, 7% Over $40,000, 8.7% (for 2005 tax year)	No	Yes
FLORIDA	No personal income tax
GEORGIA	48-7-1, et seq. Act 912 Law 1994	Resident and non-resident individuals with taxable net income and estates and trusts; Partnerships are not taxable; Counties and municipalities may levy a 1% tax on an entire taxable net income	First $750, 1% Next $1,500, 2%; Next $1,500, 3%; Next $1,500, 4%; Next $1,750, 5%; Over $7,000, 6% (for single person)	No	Yes
HAWAII	235-1, et seq.	Resident individual, estate or trust, and nonresident individual estates or trusts on income derived from Hawaii sources	First $4,000, 1.4%; Next $4,000, 3.2%; Next $8,000, 5.5%; Next $8,000, 6.4%; Next $8,000, 6.8%; Next $8,000, 7.2%; Next $20,000, 7.6%; Next $20,000, 7.9%; Over $80,000, 8.25%	No	Yes
IDAHO	63-3001, et seq.	Resident individuals, estates and trusts with taxable income and nonresident or part-year resident individuals, estates and trusts from Idaho sources; Partnerships are not taxable	First $1,000, 1.6%; Next $1,000, 3.6%; Next $1,000, 4.1%; Next $1,000, 5.1%; Next $1,000, 6.1%; Next $2,500, 7.1%; Next $12,500, 7.4%; Over $20,000, 7.8%; plus $10 excise tax	No	Yes
ILLINOIS	35 ILCS 5/201, et seq.	Individuals, estates, and trusts; Partnerships are not taxable	3% of taxable net income imposed on all taxpayers; An additional personal property replacement tax of 1.5% of net income is imposed on partnerships, trusts, and S corporations.	No	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
INDIANA	6-3-2-1, et seq.	Resident individuals, estates and trusts, and nonresidents on adjusted gross income derived from Indiana sources; Partnerships are not taxable	3.4% of adjusted gross income; general rate for all resident taxpayers; additional local taxes may be required	No	Yes
IOWA	422.5, et seq.	Residents, part-year residents, nonresidents, estates and trusts	First $1,211, 0.36%; Next $1,211, 0.72%; Next $2,422, 2.43%; Next $6,055, 4.50%; Next $7,266, 6.12%; Next $6,055, 6.48%; Next $12,110, 6.80%; Next $18,165, 7.92%; Over $54,495, 8.98%	Yes	Yes
KANSAS	79-32, 110, et seq.	Resident and nonresidents, estates, trusts and fiduciaries; Partnerships and S corporations are not taxable	First $30,000, 3.5%; Next $30,000, 6.25%; Over $60,000, 6.45%	No	Yes
KENTUCKY	141.020, et seq.	Residents, nonresidents on net income from businesses, trade, professions or other activities carried on in the state or tangible or intangible property located in the state	First $3,000, 2%; Next $1,000, 3%; Next $1,000, 4%; Next $3,000, 5%; Over $8,000, 6%	No	Yes
LOUISIANA	47:200, et seq.	Residents and nonresidents on Louisiana income; Individuals permanently domiciled in the state are taxed on all income from whatever source; All others are taxed on Louisiana income; Partnerships are not taxable	First $10,000, 2%; Next $40,000, 4%; Over $50,000, 6%	No	Yes
MAINE	Title 36 §§5111, et seq.	Every resident: entire taxable income and nonresidents: adjusted gross income, estates, and trusts: entire taxable income; Partnerships and LLC's are not taxable	First $8,700, 2%; Next $8,650, 4.5%; Next $17,350, 7%; Over $34,700, 8.5%	No	Yes
MARYLAND	Tax-Gen. Art. 10-102, et seq.	Residents and nonresidents on taxable net income. Partnerships are not taxed.	First $1,000, 2%; Second $1,000, 3%; Third $1,000, 4%; Over $3,000, 5%	No	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
MASSACHUSETTS	Ch. 62, generally	Individuals, including fiduciaries, estates of deceased Massachusetts inhabitants, and nonresidents earning income in Massachusetts; Partnerships and S corporations are not taxed; A "corporate trust" engaged in business in Massachusetts is taxed	Interest, dividends, 5.3%; short term capital gains, 12%; all other income, 5.85%	No	Yes
MICHIGAN	206.51	Individuals, estates, and trusts; Each person with business activity in Michigan allocated or apportioned to Michigan is subject to the single business tax; Partnerships and S corporations are not taxable	3.9% of taxable income	No	Yes
MINNESOTA	290.01, et seq.	Resident and nonresident individuals, estates and trusts	First $28,420, 5.35%; Next $84,489, 7.05%; Over $112,911, 7.85%	No	Yes
MISSISSIPPI	27-7-5, et seq.	Resident individuals, trusts and estates on entire net income from property owned or sold and business trade or occupation carried on in Mississippi by nonresident individuals, partnerships, trusts and estates; Partnerships and S corporations are not taxable	First $5,000, 3%; Next $5,000, 4%; Over $10,000, 5%	No	No
MISSOURI	143.011, et seq.	Resident individuals, nonresidents with income derived from Missouri sources, and estates and trusts; Partnerships are not taxable; local taxes may be required	First $1,000, 1.5%; Next $1,000, 2%; Next $1,000, 2.5%; Next $1,000, 3%; Next $1,000, 3.5%; Next $1,000, 4%; Next $1,000, 4.5%; Next $1,000, 5%; Next $1,000, 5.5%; Over $9,000, 6%	Yes	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
MONTANA	15-30-101, et seq.	Residents on entire net income; Nonresidents on net income from property owned and business carried on in Montana; Estates and trusts are taxed during administration except if for educational, charitable, or religious purposes; Partnerships and S corporations are not taxed	First $2,300, 1%; Next $1,800, 2%; Next $2,100, 3%; Next $2,400, 4%; Next $2,400, 5%; Next $3,100, 6%; Over $13,900, 6.9%	Yes	Yes
NEBRASKA	77-2701, et seq.	Residents on entire income and nonresidents on income derived from Nebraska sources; Estates and trusts are taxable; Partnerships and S corporations are not taxable	First $4,000, 2.56%; Next $26,000, 3.57%; Next $16,750, 5.12%; Over $46,750, 6.84%	No	Yes
NEVADA	No personal income tax
NEW HAMPSHIRE	77:1-1, et seq.	Inhabitants and part-year residents, partnerships, associations and trusts, and fiduciaries with income of more than $2,400 per year	5%, limited to interest and dividends	No	No
NEW JERSEY	54A:1, et seq.	Individuals, estates and trusts, residents and nonresident taxed on gross income; Nonresidents are only taxed on income derived from New Jersey sources; Partnerships and associations are not taxable; Local taxes may be required	First $20,000, 1.4%; Next $30,000, 1.75%; Next $20,000, 2.45%; Next $10,000, 3.5%; Next $70,000, 5.525%; Over $150,000, 6.37%	No	No
NEW MEXICO	7-2-7, et seq.	Residents on net income and nonresidents deriving income from business, employment, or property in New Mexico, including estates and trusts	First $8,000, 1.7%; Next $8,000, 3.2%; Next $8,000, 4.7%; Next $16,000, 6.0%; Over $40,000, 6.8% (for Tax Year 2004). First $8,000, 1.7%; Next $8,000, 3.2%; Next $8,000, 4.7%; Over $24,000, 6.0% (for Tax Year 2005)	No	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
NEW YORK	Tax 601, et seq. Ch. 60 §601	Individuals, estates and trusts, and nonresidents on income derived from New York sources; Partnerships are not taxable; New York City taxes resident individuals, estates, and trusts on their city taxable income; Partnerships are not taxable (§§11-1701, et seq.); A city income tax surcharge of 5% of net state tax is imposed on resident individuals, estates, and trusts of Yonkers	First $16,000, 4%; Next $6,000, 4.5%; Next $4,000, 5.25%; Next $14,000, 5.9%; Next $110,000, 6.85%; Next $350,000, 7.375%; Over $500,000, 7.7%; (for Tax Year 2004). First $16,000, 4%; Next $6,000, 4.5%; Next $4,000, 5.25%; Next $14,000, 5.9%; Next $110,000, 6.85%; Next $350,000, 7.25%; Over $500,000, 7.7%; (for Tax Year 2005).	No	Yes
NORTH CAROLINA	105-134, et seq.	Every individual on North Carolina taxable income, and income of estates and trusts; Partnerships are not taxable	First $21,250, 6%; Next $78,750, 7%; Next $100,000, 7.75%; Over $200,000, 8.25%	No	Yes
NORTH DAKOTA	57-38-02, et seq.	Residents and nonresidents on property owned, employment, or business carried on in North Dakota; Individuals, estates, and trusts have optional tax available (§57-38-30.3); Partnerships are not taxed	First $48,500, 2.1%; Next $68,750, 3.92%; Next $61,400, 4.34%; Next $140,450, 5.04%; Over $319,100, 5.54%	Yes	Yes
OHIO	5747.01, et seq.	Every individual and estate residing in or earning or receiving income in Ohio; Partnerships are not taxable; Local taxes may be required	First $5,000, 0.743%; Next $5,000, 1.486%; Next $5,000, 2.972%; Next $5,000, 3.715%; Next $20,000, 4.457%; Next $40,000, 5.201%; Next $20,000, 5.943%; Next $100,000, 6.9%; Over $200,000, 7.5%	No	Yes
OKLAHOMA	Title 68 §2355, et seq.	Resident and nonresident individuals, estates, and trusts on taxable Oklahoma income; Partnerships are not taxable	First $2,000, 0.5%; Next $3,000, 1%; Next $2,500, 2%; Next $1,400, 3%; Next $1,500, 4%; Next $1,600, 5%; Next $1,250, 6%; Next $1,750, 7%; Next $3,000, 8%; Next $6,000, 9%; Remainder, 10%	Yes	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
OREGON	316.037, et seq.	Every Oregon resident on entire taxable income and every nonresident or part-year resident on a prorated amount of their entire taxable income; Estates and trusts are taxable; Partnerships are not taxable; Local taxes may be required	First $2,500, 5%; Next $3,800, 7%; Over $6,300, 9% (single taxpayer)	Yes	Yes
PENNSYLVANIA	Tit. 72 §§7301, et seq.	Resident and nonresident individuals, estates, or trusts; Nonresidents only pay for portion of income derived from Pennsylvania sources; Partnerships and associations are not taxable; Local taxes may be required	3.07%	No	No
RHODE ISLAND	44-30-1, et seq.	Resident and nonresident individuals, estates, and trusts on Rhode Island income; Partnerships are not taxed	25% of federal tax	No	Yes
SOUTH CAROLINA	12-6-510, et seq.	Individuals, estates, and trusts; Partnerships are not subject to tax; Part-year and nonresidents are subject to special tax	First $2,460, 2.5%; Next $2,460, 3%; Next $2,460, 4%; Next $2,460, 5%; Next $2,460, 6%; Over $12,300, 7%	No	Yes
SOUTH DAKOTA	No personal income tax
TENNESSEE	67-2-101, et seq.	Resident persons, partnerships, associations, trusts, estates, and corporations	6%, limited to interest and dividends, not including ordinary commercial paper, trade acceptances and CD's, and certificates of deposit	No	No
TEXAS	No personal income tax
UTAH	59-10-104, et seq.	Resident individuals, estates and trusts, and nonresidents on state taxable income derived from Utah sources; Partnerships are not taxable	First $1,726, 2.3%; Next $1,724, 3.3%; Next $1,726, 4.2%; Next $1,724, 5.2%; Next $1,726, 6%; Over $8,626, 7%	No	Yes
VERMONT	Tit. 32 §§5822, et seq.	Residents, nonresidents, estates, and trusts on Vermont income	24% of federal income tax	No	Yes

Table 45: Personal Income Tax—Continued

State	Code Section	Who is Required to File	Rate	Federal Income Tax Deductible	Federal Income Used as Basis
VIRGINIA	58.1-320, et seq.	Individuals, estates, and trusts; Partnerships are not taxable; Estates and trusts are subject to tax on their Virginia taxable income; Local taxes may be required	First $3,000, 2%; Next $2,000, 3%; Next $12,000, 5%; Over $17,000, 5.75%	No	Yes
WASHINGTON	No personal income tax
WEST VIRGINIA	11-21-4e	Every individual, estate, and trust; Special tax on nonresidents with West Virginia income; Partnerships are not taxable	First $10,000, 3%; Next $15,000, 4%; Next $15,000, 4.5%; Next $20,000, 6%; Over $60,000, 6.5%	No	Yes
WISCONSIN	71.02, et seq.	Individuals, fiduciaries (except fiduciaries of nuclear decomposing trust or reserve fund), and trusts on net income; nonresident individuals and trusts on income derived from Wisconsin sources; nonresident's and part-year resident's tax liability is prorated according to amount of income derived from Wisconsin sources; Special "recycling surcharges" apply to all Wisconsin individuals, estates, trusts, businesses, and partnerships except those engaged solely in farming	First $11,480, 4.6%; Next $11,480, 6.15%; Next $149,240, 6.5%; Over $172,200, 6.75%	No	Yes
WYOMING	No personal income tax