What Are the Paycheck Taxes by State?

Paycheck taxes are required deductions from an employee’s gross earnings that employers send to government agencies. These funds finance public services and programs, and the system ensures tax obligations are met incrementally throughout the year. The amounts withheld are determined by federal and state laws, along with an employee’s personal financial information. Employers manage the collection and remittance of this tax revenue.

Universal Federal Payroll Taxes

All employees in the United States are subject to uniform federal payroll taxes, regardless of their state. A component of these deductions is for income tax withholding, which is a prepayment of an individual’s annual federal income tax. The amount is determined by the information an employee provides on their Form W-4, such as filing status and number of dependents.

Another federal payroll tax is for Social Security, governed by the Federal Insurance Contributions Act (FICA). For 2025, the employee tax rate for Social Security is 6.2% on earnings up to an annual limit of $176,100. Once an employee’s earnings exceed this threshold, no further Social Security tax is withheld for the year.

The final component is the Medicare tax, also part of FICA, which finances hospital insurance. The employee tax rate for Medicare is 1.45% with no wage limit. High-income earners are also subject to an Additional Medicare Tax of 0.9% on wages exceeding $200,000 in a calendar year.

State Income Tax Structures

Beyond federal obligations, the primary variation in paycheck deductions comes from state income taxes. Each state establishes its own system for taxing the income of its residents and those working within its borders.

States with No Income Tax

Several states do not levy a personal income tax on wages and salaries. As of 2025, these states include:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Wyoming

Washington does not tax regular income but does tax certain high-value, long-term capital gains. New Hampshire’s tax on interest and dividend income was fully phased out as of 2025.

States with a Flat Income Tax

Some states use a flat tax system, where all taxable income is taxed at a single rate. This approach simplifies tax calculations because there are no income brackets. As of 2025, states with a flat income tax include:

• Arizona
• Colorado
• Georgia
• Idaho
• Illinois
• Indiana
• Iowa
• Kentucky
• Louisiana
• Massachusetts
• Michigan
• Mississippi
• North Carolina
• Pennsylvania
• Utah

Rates vary by state; for example, Indiana’s rate is 3.0% for 2025, while North Carolina’s is 4.25%. Iowa and Louisiana recently adopted flat rates of 3.8% and 3.0%, respectively.

States with a Progressive Income Tax

Most states use a progressive income tax system, where the tax rate increases as income rises into higher brackets. This means different portions of income are taxed at different rates, similar to the federal income tax model.

The number of brackets and the rates vary by state. California has nine tax brackets, with rates for 2025 ranging from 1% to 12.3% for single filers. An additional 1% mental health services tax applies to incomes over $1 million, making the top marginal rate 13.3%.

In contrast, Hawaii has 12 brackets, with 2025 rates from 1.4% on income below $9,600 to 11% on income over $325,000 for single filers.

Additional State and Local Payroll Taxes

Employees in certain states and localities face other mandatory payroll deductions besides state income tax. These taxes fund specific state-run insurance programs or local government services and are determined by state and local laws.

State-Mandated Insurance Programs

Some states require employees to contribute to state-administered insurance programs for wage replacement. The most common are for short-term disability and paid family leave.

Mandatory disability insurance programs, funded by employee payroll deductions, provide income to individuals unable to work due to a non-work-related illness or injury. States with these programs include:

• California
• Hawaii
• New Jersey
• New York
• Rhode Island

A growing number of states have also established Paid Family Leave (PFL) programs, funded by payroll taxes. These provide paid time off for events like bonding with a new child or caring for a sick family member. States with PFL programs include:

• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Maine
• Maryland
• Massachusetts
• Minnesota
• New Jersey
• New York
• Oregon
• Rhode Island
• Washington

Local Income Taxes

Some employees are subject to income or wage taxes levied by local jurisdictions like cities, counties, or school districts. These taxes are common in states such as Pennsylvania, Ohio, Indiana, and Maryland. For example, many municipalities in Pennsylvania assess an Earned Income Tax. Philadelphia imposes a city wage tax on residents and nonresidents who work in the city, and New York City has its own local income tax on top of the state tax. These local taxes are deducted from paychecks to fund services like schools and public safety.

State Unemployment Insurance Taxes

State Unemployment Insurance (SUI), or SUTA tax, is a mandatory contribution that funds a state’s unemployment benefits program. This tax is an operating expense for the business and is paid almost exclusively by employers, so most employees will not see it deducted from their pay stubs.

Each state sets its own SUI tax rates and the annual wage base on which the tax is applied. An employer’s specific SUI tax rate is based on its “experience rating,” which reflects its history of unemployment claims. A business with more former employees filing for unemployment benefits will be assigned a higher SUI tax rate.

While SUI is an employer-paid tax in most states, employees in Alaska, New Jersey, and Pennsylvania are also required to contribute through a small payroll deduction.

Rules for Multi-State Employment

For employees who live in one state and work in another, states have rules to prevent the double taxation of income. These rules involve tax reciprocity agreements or credits for taxes paid to another state.

Tax Reciprocity Agreements

A tax reciprocity agreement is a pact between two states that allows a resident of one state to work in the other and only pay income tax to their state of residence. This simplifies tax obligations, as the employee does not have to file tax returns in both states. To use a reciprocity agreement, an employee must file an exemption certificate with their employer, instructing them to withhold taxes only for the home state. Reciprocity agreements are common in the Midwest and Mid-Atlantic. States with such agreements include Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, Montana, North Dakota, Ohio, Pennsylvania, Virginia, West Virginia, and Wisconsin.

Credit for Taxes Paid to Another State

If an employee works in a state that does not have a reciprocity agreement with their home state, they will have income taxes withheld for the work state. To avoid double taxation, the employee’s home state offers a credit for taxes paid to the other state. The employee must file two state tax returns: a nonresident return for the work state and a resident return for their home state. On the resident return, the taxpayer can claim a credit for the tax paid to the work state. This credit cannot exceed the amount of tax the home state would have charged on that same income.