Taxes may seem confusing, but they don’t have to be. We’re officially in the months-long period where the Internal Revenue Service is accepting tax returns, and it’s critical to understand what shapes fill, time limit meet and acronyms know. We break down your common questions and share everything you need to know to file your taxes in 2023.
Wondering how taxes are divided at the state and federal level? Here is your guide to indicating income taxand whether or not you have to pay it.
1099, W-4, W-2, W-9, 1040: What are these forms used for when filing your taxes?
What are the 2022 US federal tax brackets?What are the new 2023 tax brackets? Answers here
Does my state have an income tax?
The federal government levies corporate and personal income taxes to fund its programs and services. In fiscal year 2023, personal and corporate income tax will represent 59% of federal government revenue. total income.
But there are also state income taxes, which fund your state budget to pay the bills and fund statewide programs. Most states have an income tax, but they don’t all levy it the same way.
Forms, deadlines, brackets and more:What you need to know to file your taxes in 2023
How much is the child tax credit for 2023? Here’s what you need to know about qualifying.
States without income tax
These states have no income tax:
- South Dakota
New Hampshire does not tax earned income and is currently phasing out a tax on interest and dividend income. This will be repealed for taxable periods after 2026.
Similarly, Washington has no traditional income tax, instead tax capital gains income from high earners.
The IRS may owe you taxes beginning in 2020:How to find and file an amended return
What is income tax? What to know about how it works, the different types and more
Flat rate states
Some states have a flat tax rate, which means that every resident with taxable income pays the same amount, regardless of income. According to the Tax Foundation, these states are:
- Colorado: 4.55%
- Illinois: 4.95%
- Indiana: 3.23%
- Kentucky: 5%
- Massachusetts: 5%
- Michigan: 4.25%
- North Carolina: 4.99%
- Pennsylvania: 3.07%
- Utah: 4.95%
The rest of the 50 states have a graduated rate income tax, meaning the tax rate increases with higher income brackets.