As the tax season of 2026 approaches, Americans have begun to file their federal taxes to the Internal Revenue Service (IRS) for the income earned in 2025. However, apart from this, most taxpayers also need to remember to pay their state taxes.
There are exceptions, though. Residents in states such as Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not have to worry as these states do not levy state-level personal income tax, unlike the rest of the states.
On a positive note, data from the non-profit organization Tax Foundation shows that nine states have lowered their income tax rates for the 2025 fiscal year, allowing taxpayers to retain more of their income.
However, compared to previous years, individuals filing state taxes this year must be cautious as many states have not followed the new federal tax regulations outlined in the “One Big Beautiful Bill Act” signed by President Trump on July 4th.
In states that have not followed these federal regulations, taxpayers might not be able to benefit from new federal tax deductions when filing state taxes, such as the new deductions for seniors and the tax exemption for overtime pay and tips (effective since 2025). When calculating the amount of state tax to be paid, taxpayers in these states might need to re-include these federally tax-exempt incomes into their total income.
States like Indiana, Iowa, Louisiana, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, and West Virginia have reduced their individual income tax rates, albeit to varying degrees.
The following states have not fully complied with the new federal tax laws:
– California: Does not recognize the “Trump Account” for American children as a tax-deferred retirement account. This means that in California, account earnings are taxed annually, and the accrued earnings cannot be taxed at withdrawal time, and child tax rules apply. Furthermore, in California, the employer’s contributions to employee children’s “Trump Account” are considered taxable income, with only the initial $1000 seed funding provided by the federal government being exempt from being included in the income amount when filing state taxes.
– Colorado: Refuses to exempt overtime pay from taxation.
– New York: Will continue to tax tips and overtime pay.
– Illinois: Has not adopted the federal policy of tax exemption for overtime pay and tips.
– Maine: Has rejected the additional deductions for seniors, car loan interest deductions, and the tax exemption policies for tips and overtime pay as outlined in the “One Big Beautiful Bill Act.”
– Washington D.C.: The City Council passed an emergency bill at the end of last year, decoupling certain tax provisions in the city from the recent federal tax changes, such as the new deductions for seniors and tax exemption for tips. However, Congress is trying to overturn the city’s policy. The U.S. House of Representatives passed a measure on February 4th and is now awaiting Senate consideration, likely to be voted on this week.
If a state levies personal income tax, you must file under two circumstances:
1. You are a resident of that state.
2. You are not a resident of that state but earn income within that state. This income includes rental income from another property outside of your home state or income earned in that state by professionals like athletes or consultants working across state lines.
Most states follow the federal deadline of April 15th. However, you should still double-check the regulations in your specific state, as deadlines may vary due to natural disasters, etc.
If your state does not impose an income tax, there is no tax-filing deadline.
(Reference to the report by “USA Today”)