State income tax on side income
Federal tax gets most of the attention, but your state can add several percent of your side-income profit to the bill, or nothing at all. Here is how to work out which applies to you.
Self-employment tax is federal only
The 15.3% self-employment tax goes to the federal government for Social Security and Medicare. States do not charge an equivalent. What states add is an income tax on your net profit, usually at the same rates they apply to wages. Our set-aside guide shows how the pieces stack up.
States with no income tax on wages or business profit
As of 2026, these eight states have no broad individual income tax:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Wyoming
New Hampshire used to tax interest and dividends, but that tax no longer applies for periods beginning on or after January 1, 2025. Washington also does not tax wages or salary, though it does tax certain capital gains, so it is not treated as fully tax-free for individuals. For a typical side hustle in any of these places, you can enter 0% as the state rate in the calculator.
No income tax does not always mean no business tax. A few of these states, including Washington and Texas, have business-level taxes that can apply to some sole proprietors. Check with the state's department of revenue before assuming your side income is untaxed there.
Flat rates and graduated brackets
Elsewhere, states fall into two broad groups. Some charge a single flat rate on all taxable income. Others use graduated brackets like the federal system, with rates that rise as income rises; in a few states the top rate is above 10%. Because rates and brackets are adjusted by legislatures, look up the current figures on your state revenue department's website rather than relying on a table that might be a year out of date.
How to pick a number for the calculator
The calculator asks for one flat state rate, which keeps it simple. Here are two practical ways to choose it:
- Use your state's flat rate if it has one.
- Estimate from last year's state return. Divide the total state income tax you paid by your state taxable income to get your average rate. Your side income is taxed at your higher marginal rate, so nudging the figure up by a point or two is a cautious choice.
Local income taxes
Some cities, counties and school districts levy their own income tax, and these are easy to miss because a day-job employer often withholds them automatically while your side profit is untouched. Examples include many municipalities in Ohio and Pennsylvania, New York City, and some Maryland counties. If you live or work in a place that has one, ask your local tax office whether and how it applies to self-employment profit.
If you live in one state and earn in another
Generally you owe tax to your home state on all of your income, and if another state also taxes some of it you can usually claim a credit on your home-state return for what you paid there. Rules differ widely between states, especially for work done remotely for out-of-state customers, so check both states' guidance if your situation crosses a state line.
State estimated payments
If your state taxes income and you owe more than a small amount, it will likely expect estimated payments throughout the year, just like the IRS. The forms, thresholds and dates are set by each state. Many follow the federal dates, but not all do. For example, California requires 30% of the required annual payment in April, 40% in June, nothing in September and 30% in January. Our quarterly estimated taxes guide covers the federal side.
Sales tax is a separate matter
If you sell physical products, and in some states certain services, you may also have to collect and remit sales tax. That is a different tax from income tax and has its own registration and filing rules in each state. It is worth checking before your first sale rather than after.
Run the numbers with the free calculator
This guide is general information, not tax advice. State tax rules change frequently and vary widely. Confirm current rates and rules with your state revenue department or a tax professional.