States With Flat Income Tax Rates for Tax Year 2021

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A flat tax rate is a rate that is even across the board; all taxpayers pay the same rate regardless of how much they earn. The concept has a lot of support but has also seen opposition.

For tax year 2021—the return you file in 2022—there are nine states that have a flat income tax rate. The map below illustrates income tax rates for all states in the U.S. Hover over each one for for more information. Then, keep reading to learn which states have a flat income tax rate.

States With a Flat Income Tax Rate

Tax concepts are rarely black and white, and specific rules can differ among the states that have adopted a flat tax system. For the 2021 tax year (the taxes you file in 2022), state individual income taxes for flat tax states are outlined below.

Colorado Income Tax Rate: 4.55%

Colorado uses the same personal exemption and standard deduction amounts that the Internal Revenue Service (IRS) lays out for federal income taxes. There are no personal exemptions in Colorado.

For tax year 2021, single individuals can claim a standard deduction of $12,550, while those who are married can claim a standard deduction of $25,100. This is for federal income taxes.

Illinois Income Tax Rate: 4.95%

The personal exemption allowed for individuals is $2,325 per person, $4,650 for married couples filing jointly, and $2,325 for dependents. There is no state standard deduction in Illinois.

Indiana Income Tax Rate: 3.23%

Personal exemptions are $1,000 if you're a single taxpayer, up to $2,500 for each of your dependents, and $2,000 for married couples who file jointly. There is no state standard deduction in Indiana.

Kentucky Income Tax Rate: 5.0%

The standard deduction for individuals who are single or married filing jointly in Kentucky is $2,690, and there are no personal exemptions.

Kentucky adopted the flat tax system in 2018 (it became effective in the 2019 tax year). During that same time, it eliminated itemized deductions for medical and dental expenses, casualty or theft losses, moving expenses, and premiums paid for health and long-term care insurance.

Massachusetts Income Tax Rate: 5.0%

There is no standard deduction, but personal exemptions are somewhat generous in Massachusetts at $4,400 for single taxpayers and $8,800 for married taxpayers filing joint returns. There is also a $1,000 exemption for dependents.

Michigan Income Tax Rate: 4.25%

There's no standard deduction in Michigan, but personal exemptions are $4,750 for both single taxpayers and dependents, and $9,500 for married taxpayers who file jointly.

North Carolina Income Tax Rate: 5.25%

North Carolina enacted its current income tax system in 2014 and eliminated the earned income tax credit and personal exemptions at the same time. Deductions for medical expenses, retirement contributions, child care, and college 529 plans were also eliminated. For state standard deductions, single individuals can claim $10,750, while those who are married can claim $21,500.

North Carolina has the highest flat income tax rate among all flat tax states.

Pennsylvania Income Tax Rate: 3.07%

This rate is the lowest among flat tax states in the U.S. Pennsylvania law does not recognize personal exemptions or standard deductions for individuals or dependents.

Utah Income Tax Rate: 4.95%

Although Utah does not technically have a standard deduction, it does offer a nonrefundable taxpayer tax credit equal to 6% of your federal deduction, and it also allows a personal exemption of $1,750 per dependent that you were allowed to claim on your federal tax credit. The taxpayer credit begins to phase out at $15,095 for single people and married couples filing separately, and $30,190 for married couples filing jointly.

Support and Criticism for a Flat Tax System

Supporters of a flat tax system argue that it encourages wealth accumulation because top earners aren't punished with higher tax rates. Since everyone pays the same rate, the system is far simpler than the progressive tax system in place in most states.

Opponents of the flat tax system argue that it places an unfair burden on low-income earners—the people with the lowest income pay the same tax rate as the people with the highest income in the state.

Giving up 5% of $100,000 in income leaves plenty of money for housing, food, and recreation, but 5% of $30,000 might threaten an individual's ability to afford necessities like food and shelter.

Frequently Asked Questions (FAQs)

What are state income tax rates?

State income tax rates determine the amount residents must pay in state income taxes each year. State income tax rates range from 0% (no income tax rate) to 13.3% (for the highest earners) for tax year 2021. Each state determines its own income tax rate.

What is a flat tax rate?

A flat tax rate means all taxpayers, regardless of income, pay the same rate when it's time to pay taxes. For tax year 2021, the tax return you file in 2022, nine states have a flat income tax rate.

Article Sources

  1. IRS. "IRS Provides Tax Inflation Adjustments for Tax Year 2021." Accessed Jan. 26, 2022.

  2. Commonwealth of Kentucky. "Income Taxes." Accessed Jan. 26, 2022.

  3. North Carolina Department of Revenue. "2014 Individual Income Tax Changes." Accessed Jan. 26, 2022.

  4. Utah State Tax Commission. "Utah Personal Exemption." Accessed Jan. 26, 2022.

  5. Utah State Tax Commission. "Taxpayer Tax Credit." Accessed Jan. 26, 2022.

  6. Federation of Tax Administrators. "State Individual Income Taxes." Accessed Jan. 26, 2022.