States with the Highest Top Income Tax Rates

April 24, 2014
Laura Joszt

State income taxes can be confusing. While some states have no income tax at all, others have multiple brackets. Does your state have one of the highest top income tax rates?

Though most people just finished filing 2013’s taxes a few weeks ago, it’s never too early to start considering this year’s taxes.

As taxpayers know, the state they live in greatly influences the taxes they pay. For instance, there are some states where property taxes are just a couple hundred dollars a year and others where people pay more than $10,000.

Then there’s state income tax, which are structured very differently across the country. And the Tax Foundation recently released its report on the top state income tax rates for 2014.

There are 7 lucky states with no income tax at all (Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming) and others have a flat rate (Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, New Hampshire, Pennsylvania, Tennessee, and Utah). North Carolina just recently moved from 3 brackets to a flat tax state, according to the Tax Foundation.

To further show how diverse income taxes can be state by state, New Hampshire and Tennessee only tax interest and dividends income, not wages.

Lucky taxpayers in Kansas, North Dakota, Ohio, and Wisconsin will be happy to know these states made across-the-board income tax rate reductions relative to 2013 taxes.

And while some states offer generous standard deductions and personal exemptions to help taxpayers adjust income based on household size, most of the states with the highest top tax rate don’t.

Here are the states with the highest top income tax rates.

(Note: Brackets are for single taxpayers. States handle joint filers and married filing separately differently.)

10. Wisconsin

Top marginal rate: 7.65%

Standard deduction: $9,930

Personal exemption: $700

Racine, © Jeremy Atherton, 2007

Despite across-the-board tax rate reductions, Wisconsin still has one of the highest top tax rates. To get hit by the top rate, filers must earn more than $240,190, which is a large jump from the second highest bracket at $21,820.

The tax climate in Wisconsin isn’t great for businesses, either, as the Tax Foundation has reported that the state has one of the worst state business tax climates.

9. Maine

Top marginal rate: 7.95%

Standard deduction: $6,100

Personal exemption: $3,900

Old Portland

There are only 2 rates in Maine, which means most people (and all physicians) will be hit with the top rate. Taxpayers either fall under the 6.5% tax for earning between $5,200 and $20,900 or the 7.95% rate for earning more than $20,900.

8. New York

Top marginal rate: 8.82%

Standard deduction: $7,700

Personal exemption: $1,000

Brooklyn Heights Promenade

In order to be hit with the top tax rate, taxpayers must earn more than $1,029,250; otherwise if they earn less than that, but more than $205,850, then the tax rate is 6.85%.

New Jersey and New York typically battle each other out for the worst overall state taxes, though New York won the undesirable title this year.

6. (tied) Vermont

Top marginal rate: 8.95%

Standard deduction: $6,200

Personal exemption: $3,900

Montpelier

To get hit with the top tax rate, filers must earn at least $405,100 in Vermont, although the second highest rate isn’t much more favorable. Those with income topping $186,350 will get hit with a 8.8% tax rate.

6. (tied) District of Columbia

Top marginal rate: 8.95%

Standard deduction: $2,000

Personal exemption: $1,675

Dupont Circle

Unfortunately, for residents of the nation’s capital, there’s not much of a difference between the highest tax rate and the second highest, although the brackets differ greatly. While the rate is 8.95% after $350,000, those making more than $40,000 and less than $350,000 are taxed at a slightly lesser rate of 8.5%.

5. New Jersey

Top marginal rate: 8.97%

Standard deduction: N/A

Personal exemption: $1,000

Atlantic City

The tax rates in New Jersey start reasonably (1.4% for less than $20,000) but escalate quickly so that people making $500,000 are hit with the top tax rate of 8.97%.

New Jersey may have lost the title of having the worst state taxes to New York last year, but it was a close call.

4. Iowa

Top marginal rate: 8.98%

Standard deduction: $1,900

Personal exemption: $40 credit

Des Moines

Iowa has 9 different tax rates. People making less than $3,030 are taxed at less than 1%, but anyone who earns more than $68,175 is within the top tax rate. The state also has one of the smallest personal exemptions, although Arkansas only offers a $26 credit, and there’s no personal exemption in North Carolina and Pennsylvania.

Iowa also had the second worst corporate tax rate last year.

3. Minnesota

Top marginal rate: 9.85%

Standard deduction: $6,200

Personal exemption: $3,900

Minneapolis

Minnesota’s lowest tax rate starts high at 5.35% for anyone earning less than $24,680. And most physicians will be hit with the top tax rate since it affects anyone making more than $152,540. This high-earner tax bracket is new to the state.

In the past the Tax Foundation named Minnesota’s state taxes among the worst in the country with poor rankings in corporate tax, independent income, and sales tax.

2. Oregon

Top marginal rate: 9.9%

Standard deduction: $2,025

Personal exemption: $188 credit

McCall Park in Portland

Oregon may only have 5 tax rates, but even the lowest is close to the top rate in some states. Plus, it has a fairly low income for the top tax rate. People making less than $3,300 will get hit with a 5% tax and those with income over $125,000 will hit the top rate of 9.9%.

In comparison, people in North Dakota who make more than $405,100 are only subject to a top tax rate of 3.22%.

1. California

Top marginal rate: 13.3%

Standard deduction: $3,906

Personal exemption: $106 credit

San Diego

California has 10 different tax brackets starting with 1% for those who make less than $7,582 and going up to 13.3% for those whose income tops $1 million. The state doubles all but the top bracket for joint filers.