Which Is Bigger: State or Federal Income Tax?

In the United States, individuals are subject to income taxes levied by both the federal government and, in most cases, their state government. This article will explore the fundamental components of federal and state income taxes and examine the factors that determine which of these tax burdens might be larger for an individual.

Federal Income Tax Fundamentals

The U.S. federal income tax system operates on a progressive tax rate structure, meaning higher income levels are taxed at higher percentages. In 2024, for example, there are seven federal tax brackets with rates ranging from 10 percent to 37 percent. This progressive system ensures that only portions of income falling within a specific bracket are taxed at that bracket’s rate, not an individual’s entire earnings.

Taxable income for federal purposes is determined after accounting for deductions and credits. Most taxpayers utilize the standard deduction, which is a fixed dollar amount that reduces taxable income based on filing status. For 2024, the standard deduction is $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for those filing as head of household. Alternatively, individuals can itemize deductions if their eligible expenses exceed the standard deduction amount.

Beyond deductions, tax credits directly reduce the amount of tax owed, dollar for dollar. Common federal tax credits include those for child care expenses, education costs, or certain energy-efficient home improvements. The Internal Revenue Service (IRS) is the federal agency responsible for collecting these taxes and administering the tax code.

State Income Tax Fundamentals

State income tax systems exhibit considerable diversity across the United States, unlike the uniform federal system. While most states levy an income tax, eight states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming—do not impose a general individual income tax on wages.

For states that do tax income, systems vary between flat tax rates and progressive tax rates. A flat tax applies a single percentage rate to all taxable income, regardless of the amount. As of 2025, several states, including Colorado, Illinois, and Pennsylvania, utilize a flat tax structure. Conversely, many other states, similar to the federal system, employ a progressive structure where tax rates increase with income levels.

State income tax liability is calculated after considering state-specific deductions and credits, which may or may not align with federal provisions. Some states largely conform to the federal tax code when determining taxable income, while others have their own unique rules and definitions. The top marginal state income tax rates can range from as low as 2.5 percent to over 13 percent in some high-tax states like California.

Influencing Factors on Tax Amounts

Several key variables significantly impact an individual’s overall federal and state tax liability, influencing which burden might be larger. An individual’s income level is a primary determinant, as both federal and progressive state tax systems apply higher rates to higher earners. As income increases, a larger portion of earnings may fall into higher tax brackets, leading to a greater tax obligation.

Filing status also plays a substantial role in calculating tax amounts. Options such as Single, Married Filing Jointly, Married Filing Separately, or Head of Household each have different standard deduction amounts and income thresholds for tax brackets. For instance, married couples filing jointly generally benefit from wider tax brackets and a larger standard deduction compared to single filers.

The utilization of deductions and credits, both federal and state-specific, directly reduces the amount of income subject to tax or the amount of tax owed. Claiming eligible deductions, whether the standard deduction or itemized expenses, lowers taxable income. Tax credits provide direct reductions to the final tax bill.

Finally, an individual’s state of residence is a crucial factor due to the significant variations in state tax laws. Living in one of the states without an income tax will eliminate that specific tax burden, while residing in a state with high progressive rates can result in a substantial state tax liability. These state-specific rules and rates directly influence the relative size of an individual’s state tax burden compared to their federal obligation.

Relative Tax Burdens

For most taxpayers across the United States, the federal income tax liability is generally larger than their state income tax obligation. This is primarily because federal income tax rates are typically higher and apply to a broader income base compared to state rates. The federal system has marginal tax rates that can reach up to 37 percent, while most state income tax rates are considerably lower, often ranging between 1 percent and 10 percent, with some high-tax states reaching around 13 percent.

Additionally, federal payroll taxes (for Social Security and Medicare) are a mandatory federal levy on income, separate from income tax, and contribute significantly to the overall federal tax burden. State income taxes do not typically include such broad payroll taxes.

However, there are scenarios where state taxes can become substantial or even approach federal levels for certain individuals. Residents of states with high progressive income tax rates, particularly those with higher incomes, might face a considerable state tax bill. While the federal income tax remains the primary income tax for most, the combined impact of various state and local taxes, including sales and property taxes, should also be considered. The exact proportion of federal versus state tax depends on an individual’s income, deductions, credits, and state of residence.