These U.S. States Have the Lowest Flat State Income Tax Rates

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KEY POINTS

  • Some states have a flat income tax rate that applies to all residents regardless of income.
  • Colorado, Kentucky, and Michigan all make the list for lowest flat state income tax rates.

Do you live in one of these states?

Paying state and federal taxes on earned income is the norm for many Americans. But tax rates can differ significantly from state to state. Nine states have a flat tax rate for all residents. That means residents with low incomes and high incomes all pay taxes at the same rate. Those states are:

  • Colorado
  • Illinois
  • Indiana
  • Kentucky
  • Massachusetts
  • Michigan
  • North Carolina
  • Pennsylvania
  • Utah

There are two other states worth mentioning in this discussion: New Hampshire and Washington. These two states don't levy state income tax on regular earned income. They do, however, impose a flat rate tax for other tax situations.

New Hampshire: Residents pay a tax rate of 5% on interest and dividends.

Washington: Residents are responsible for paying a 7% tax on the sale or exchange of long-term capital assets if their profits exceed $250,000 annually.

The states with the lowest flat state income tax rates

Here's a closer look at the states with the lowest flat state income tax rates based on current tax rates.

Pennsylvania

Pennsylvania is the state with the lowest flat state income tax rate. All residents in this state pay 3.07% on earned income.

Indiana

Indiana's state income tax rate is not too far off. All residents in this state pay 3.23% on earned income.

Michigan

All Michigan residents pay a 4.25% tax on earned income.

Colorado

Colorado residents pay a tax rate of 4.55% on earned income.

Illinois

Illinois residents pay a 4.95% tax on earned income.

Utah

Like Illinois residents, Utah residents pay a tax rate of 4.95% on earned income.

The other three states with flat state income tax rates (North Carolina, Massachusetts, and Kentucky) charge 5% or more.

What about states without a flat rate tax?

Some states don't have a flat rate state income tax. It's worth noting there are some states with lower tax rates than the rates listed above -- especially for residents with a lower income.

For the tax year 2021, Ohio residents with a taxable income of up to $25,000 pay a 0% state income tax rate -- which means they're not responsible for paying any state income tax.

North Dakota's lowest state income tax rate is 1.1%. This rate applies to single earners with an income of up to $40,525. Married couples filing jointly with an income of up to $67,700 also pay this rate.

If you've recently moved to a new state or are planning to move in the future, be sure to research the state's income tax system so you know what to expect.

Three tips to make tax season a breeze

It's the rare person who looks forward to tax season, but filing your taxes doesn't have to be a headache. Here are some tips to get you started.

  1. Get organized. If you have yet to begin filing your taxes, now is an excellent time to get organized. Ensure you have all of your tax and financial documents ready to go so the filing process is simple.
  2. Don't delay. It's best to file sooner rather than later. It may take you longer than you think to file your return. Plus, the IRS is backlogged, so there are significant delays. If you're expecting a tax refund, you'll want to file ASAP to minimize payment delays.
  3. Use tax software. If you need some guidance when filing, tax software can make the process simple. Check out our best tax software list to learn more.

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