15 States With the Highest Income Taxes in the US
In this article, we will look at 15 states with the highest income taxes in the US. If you want to skip our detailed analysis, head straight to 5 States with the Highest Income Taxes in the US.
US Income Taxes: An Outlook
The beginning of 2024 brings new legislative changes to the US tax system. The new year has begun with significant income tax cuts for several states. Only two states including California and Michigan have increased their personal income tax rates to 14.40% and 4.25% from previous tax rates of 13.30% and 4.05%, respectively. Many states are working on reducing their taxes and have taken legislative measures to reduce their tax rates in the coming years gradually. There are already some states with no sales tax or income tax and many states are aiming to lower their income taxes, which is good news for Americans. Thirty-four states have made notable tax changes in 2024 taking effect on January 1, as per the Tax Foundation. With massive tax cuts across several states, the US is not among the countries with highest income tax rates in the world.
The US government generates most of its revenue from individual income taxes and corporate income taxes. As of December 31, 2023, the US government had collected a total revenue of $1.11 trillion for fiscal 2024, as per the US Treasury. The individual income taxes contributed 47.40% to the total revenue, while the corporate income taxes accounted for 13.54% of the total revenue. The Social Security and Medicare taxes accounted for another 34.06% of the revenue. In fiscal 2024 so far, the individual and corporate income taxes have a combined contribution of $675 billion, making up 61% of total revenue. In fiscal 2023, the US government gathered a total revenue of $4.44 trillion with a slight improvement compared to $4.19 trillion in 2015. If we consider the revenue against inflation, the total revenue has decreased. Moreover, the federal government spending in fiscal 2023 was $6.13 trillion, almost $1.69 trillion in deficit.
The Internal Revenue Service (IRS) has made changes to nearly 60 tax provisions for tax year 2024. The changes of tax year 2024 will apply to income tax returns filed in 2025. For individual taxpayers, the top tax rate remains unchanged at 37% from 2023 with incomes higher than $609,350 and $731,200 for married couples filing jointly. Other rates for both individual taxpayers and married couples filing jointly are 35%, 32%, 24%, 22%, and 12%. The minimum income tax rate for an individual taxpayer is 10% with an income of $11,600 or less. The IRS has increased the standard deduction to $14,600 for 2024 for individual taxpayers and married individuals filing separately, an increase of $750 from 2023. For married couples filing jointly, the IRS has increased the standard deduction to $29,200 for 2024, a rise of $1,500 from tax year 2023. The heads of households have a standard deduction of $21,900 for tax year 2024, up by $1,100 in tax year 2023. The personal exemption remains unchanged at zero for the tax year 2024. Some states have made income tax changes and among them are 16 states with income tax cuts in 2024.
On January 12, the IRS announced its Free File Guided Tax Software service which will be available for taxpayers later in January. The IRS will begin accepting and processing individual tax returns on January 29. Taxpayers across the US can access free software products through the IRS Free File. The IRS Commissioner, Danny Werfel, said:
"The IRS continues its partnership with Free File Inc. to give taxpayers an opportunity to file their taxes electronically for free. Taxpayers will always have choices for how they file their taxes. They can file using tax software, a trusted tax professional, Free File, or free tax preparation services through IRS partners. Through the years, Free File has helped millions of taxpayers, and it remains an important option for people to consider using to quickly and easily file their taxes."
Top US Tax Services Providers
Some of the leading US tax services providers and consultation firms include Intuit Inc. (NASDAQ:INTU), Ryan Specialty Holdings, Inc. (NYSE:RYAN), and Automatic Data Processing, Inc. (NASDAQ:ADP).
Intuit Inc. (NASDAQ:INTU) is one of the leading tax services providers that owns several tax services softwares including Credit Karma, TurboTax, and Quickbooks, among others. On November 28, 2023, Intuit Inc. (NASDAQ:INTU) reported its results for the first quarter of fiscal 2024. The company posted earnings per share of $2.47, beating consensus estimates by $0.49. Intuit Inc. (NASDAQ:INTU) reported a revenue of $2.98 billion, surpassing estimates by $94.53 million. Here are some of the comments from the company’s earnings call:
“We had a very strong first quarter and have great momentum innovating on our platform across the company. Total revenue grew 15%, driven by Small Business and Self-Employed Group revenue growth of 18% and Consumer Group revenue growth of 25%. This was partially offset by Credit Karma revenue decline of 5%, in line with our expectations for Q1 given the macroeconomic environment. With the strong start to the year, we are reiterating our full-year guidance for fiscal year 2024. Consumer Group revenue growth reflects a strong finish to the tax extension season. We remain focused on transforming the assisted consumer and business tax categories with TurboTax Live.”
Ryan Specialty Holdings, Inc. (NYSE:RYAN) is a top international specialty insurance firm that also operates in the tax services segment. On January 2, Ryan Specialty Holdings, Inc. (NYSE:RYAN) announced the appointment of Pat Ryan, Jr. to its Board of Directors, effective January 1. William J. Devers has retired from Ryan Specialty Holdings, Inc.’s (NYSE:RYAN) Board of Directors. Pat has served on the board of Penske Automotive Group, Inc. (NYSE:PAG) for 25 years. On December 21, 2023, the company announced that it signed a definitive agreement to acquire Castel Underwriting Agencies Limited, a Managing General Underwriting (MGU) platform. Castel Underwriting Agencies Limited is a UK-based firm that consists of thirteen unique MGUs, each with expertise in a specific product niche.
Automatic Data Processing, Inc. (NASDAQ:ADP) is a leading US firm that specializes in human resources management software and services. The company also offers tax and compliance services to its clients. On January 10, Automatic Data Processing, Inc. (NASDAQ:ADP) announced the appointment of Thomas J. Lynch as its independent, non-executive board chair. Lynch will succeed Carlos A. Rodriguez as executive chair of the board, effective January 31. The company’s new executive chair of the board has been part of the board since 2018. Rodriguez will continue to be part of the board as a non-employee director. On January 10, the company also announced its regular quarterly dividend of $1.40 per share payable on April 1, to shareholders of record on March 8.
These were a few leading US tax service providers. Now, let’s take a look at the states with the highest income taxes in the US.
15 States With the Highest Income Taxes in the US
Our Methodology
To compile or list the states with the highest income taxes in the US, we have taken personal income tax data from the Tax Foundation. We have considered the states with the highest top end tax rate for personal income taxes. We have ranked the states in ascending order of their upper end of personal income tax rates in 2024, and have broken the tie based on the lower bound of the tax rate.
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Note: Though ‘The District of Columbia (DC)’ is not a state, it is not part of any state either. We have listed DC among the states with the highest income taxes in the US.
15 States With the Highest Income Taxes in the US
15. South Carolina
Personal Income Tax in 2024: 6.40%
South Carolina has a top-end tax rate of 6.40% and a low-end tax rate of 0%. The state has reduced its top personal income tax rate from 6.50% to 6.40% in 2024. South Carolina is ranked fifteenth among the states with the highest income taxes in the US.
14. West Virginia
Personal Income Tax in 2024: 6.50%
West Virginia has a top-end tax rate of 6.50% and a low-end tax rate of 3%. West Virginia ranks among the states with the highest income taxes in the US.
13. Delaware
Personal Income Tax in 2024: 6.60%
Delaware is one of the states with the highest income taxes in the US. The state has a top-end income tax rate of 6.60% and a low-end income tax rate of 2.20%.
12. Connecticut
Personal Income Tax in 2024: 6.99%
Connecticut’s personal income tax rates range between 3% and 6.99%. Ranked 12th on our list, Connecticut is one of the states with the highest income taxes in the US.
11. Maine
Personal Income Tax in 2024: 7.15%
Maine has a top personal income tax rate of 7.15% and a low personal income tax rate of 5.80%. The state offers a $300 dependent exemption tax credit. Maine ranks among the states with the highest income taxes in the US.
10. Wisconsin
Personal Income Tax in 2024: 7.65%
Wisconsin’s personal income tax rates range between 3.54% and 7.65%. Wisconsin is placed 10th among the states with the highest income taxes in the US.
9. Vermont
Personal Income Tax in 2024: 8.75%
Vermont is one of the leading states with the highest income taxes in the US. Vermont’s personal income tax rates range between 3.35% and 8.75%.
8. Massachusetts
Personal Income Tax in 2024: 9%
Massachusetts has a top-end individual income tax rate of 9% and a low-end individual income tax rate of 5%. Massachusetts is placed eighth among the states with the highest income taxes in the US.
7. Minnesota
Personal Income Tax in 2024: 9.85%
Minnesota has a personal income tax rate between 5.35% and 9.85%. In 2024, the state will levy a 1% tax on the net investment income of individuals as well. Minnesota ranks among the states with the highest income taxes in the US.
6. Oregon
Personal Income Tax in 2024: 9.90%
Oregon is placed sixth among the states with the highest income taxes in the US. Oregon has a top personal income tax rate of 9.90% and a low personal income tax rate of 4.75%.
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Disclosure: None. 15 States with the Highest Income Taxes in the US is originally published on Insider Monkey.
