February 12, 2026, 2:16 PM ET
Most Americans tend to take filing their federal taxes seriously—after all, the IRS can be pretty intimidating. But let’s not forget about state taxes, which can sometimes slip under the radar for many people.
Of course, there are some notable exceptions. Residents in states like Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming don’t have to stress about personal income tax at all. So, that’s a relief in a way, right?
It’s nice to hear that some states are actually lowering their income tax rates, as highlighted by the Tax Foundation, which suggests that these reductions heading into 2025 will leave taxpayers with more money in their pockets.
However, it’s crucial for state tax filers to exercise extra caution this year. Many states have not been keeping up with new federal tax regulations introduced in a significant tax and spending bill from last July.
For individuals in non-compliant states, this could mean missing out on new tax benefits on their state returns. For instance, there are added deductions for seniors and tax exemptions for tips and overtime retroactive to 2025. They might find themselves needing to include that income when figuring out how much they owe to the state.
Which states will lower their income tax rates in 2025?
Which states are not compliant with federal tax law?
Some states are choosing not to adhere to all the recent federal tax guidelines.
- California: The state doesn’t recognize Trump’s account as tax-deferred, meaning that income is taxed annually for the child, and any growth isn’t deferred.
- Colorado: Currently refusing to exempt overtime pay from taxes. They’re planning to add a section for reporting “excess federal deductions for overtime.”
- New York: Overtime pay and tips will still be taxed with new codes for reporting these items.
- Illinois: Still hasn’t introduced a tax exemption for overtime and tips, though updates are expected.
- Maine: Senior deductions for overtime, bonuses, and tips have been rejected.
Note: Washington, D.C., recently passed an emergency bill modifying parts of its tax code due to federal changes, including new senior citizen deductions. Yet, Congress voted to reject this bill, potentially making D.C.’s tax code not compliant with federal standards.
Typically, an adjustment in tax laws during the tax season can be chaotic. D.C. officials have warned that they may need to pause the current filing season to rework tax forms, which will take time.
Who must file a state tax return?
If your state imposes income taxes, there are a couple of scenarios requiring you to file a return.
- You’re a resident of that state.
- You’re not a resident, but you earn income there—like from rental properties or work performed in that state. For these situations, you need to file a return in each state where you earn income, and your home state usually allows you to deduct those state taxes paid.
Will the state conduct a tax audit?
Yes, it’s a possibility.
States have their own auditing processes, which are similar to those of the IRS. Misreported data, calculation errors, incomplete forms, excessive deductions, or not filing on time are common triggers for audits.
When a state decides to audit, they usually contact you directly through email to give you further information.
Does a state audit automatically mean an IRS audit?
Not always, but there is a chance. States often share information with the IRS, so some details might overlap between the two returns.
When is state tax due?
Most states follow federal deadlines, which are generally set for April 15. But it’s wise to check your specific state’s deadline, as it could vary, especially in case of emergencies or disasters.
If your state doesn’t have an income tax, there isn’t a filing deadline.
