State Income Tax and Student Loans
Your state's income tax never appears in an income-driven payment formula. That is not a technicality: it is the reason two borrowers with identical loans and identical AGI can owe the same monthly payment in Texas and in California, while their budgets look nothing alike.
All 51 Jurisdictions, Sorted by Rate
Rank 1 is the lowest rate. No-income-tax states count as 0%, flat states at their flat rate, graduated states at their top marginal rate. Use the filters to isolate a structure, or click a column heading to re-sort.
| State | Structure | Rate | Rank | vs median | Per $10k |
|---|---|---|---|---|---|
| Alaska | None | 0% | 1 | −4.6 pp | $0 |
| Florida | None | 0% | 2 | −4.6 pp | $0 |
| Nevada | None | 0% | 3 | −4.6 pp | $0 |
| New Hampshire | None | 0% | 4 | −4.6 pp | $0 |
| South Dakota | None | 0% | 5 | −4.6 pp | $0 |
| Tennessee | None | 0% | 6 | −4.6 pp | $0 |
| Texas | None | 0% | 7 | −4.6 pp | $0 |
| Washington | None | 0% | 8 | −4.6 pp | $0 |
| Wyoming | None | 0% | 9 | −4.6 pp | $0 |
| Arizona | Flat | 2.5% | 10 | −2.1 pp | $250 |
| North Dakota | Graduated | 2.5% | 11 | −2.1 pp | $250 |
| Ohio | Flat | 2.75% | 12 | −1.9 pp | $275 |
| Indiana | Flat | 2.95% | 13 | −1.7 pp | $295 |
| Louisiana | Flat | 3.0% | 14 | −1.6 pp | $300 |
| Pennsylvania | Flat | 3.07% | 15 | −1.6 pp | $307 |
| Kentucky | Flat | 3.5% | 16 | −1.1 pp | $350 |
| Iowa | Flat | 3.8% | 17 | −0.8 pp | $380 |
| Arkansas | Graduated | 3.9% | 18 | −0.7 pp | $390 |
| North Carolina | Flat | 3.99% | 19 | −0.6 pp | $399 |
| Mississippi | Flat | 4.0% | 20 | −0.6 pp | $400 |
| Michigan | Flat | 4.25% | 21 | −0.4 pp | $425 |
| Colorado | Flat | 4.4% | 22 | −0.2 pp | $440 |
| Oklahoma | Graduated | 4.5% | 23 | −0.1 pp | $450 |
| Utah | Flat | 4.5% | 24 | −0.1 pp | $450 |
| Nebraska | Graduated | 4.55% | 25 | −0.1 pp | $455 |
| Missouri | Graduated | 4.7% | 26 | +0.1 pp | $470 |
| West Virginia | Graduated | 4.82% | 27 | +0.2 pp | $482 |
| Illinois | Flat | 4.95% | 28 | +0.3 pp | $495 |
| Alabama | Graduated | 5.0% | 29 | +0.4 pp | $500 |
| Georgia | Flat | 5.19% | 30 | +0.6 pp | $519 |
| Idaho | Flat | 5.3% | 31 | +0.7 pp | $530 |
| Kansas | Graduated | 5.58% | 32 | +1.0 pp | $558 |
| Montana | Graduated | 5.65% | 33 | +1.0 pp | $565 |
| Virginia | Graduated | 5.75% | 34 | +1.1 pp | $575 |
| New Mexico | Graduated | 5.9% | 35 | +1.3 pp | $590 |
| Rhode Island | Graduated | 5.99% | 36 | +1.4 pp | $599 |
| Maryland | Graduated | 6.5% | 37 | +1.9 pp | $650 |
| Delaware | Graduated | 6.6% | 38 | +2.0 pp | $660 |
| Connecticut | Graduated | 6.99% | 39 | +2.4 pp | $699 |
| Maine | Graduated | 7.15% | 40 | +2.5 pp | $715 |
| Wisconsin | Graduated | 7.65% | 41 | +3.0 pp | $765 |
| Vermont | Graduated | 8.75% | 42 | +4.1 pp | $875 |
| Massachusetts | Graduated | 9.0% | 43 | +4.4 pp | $900 |
| Minnesota | Graduated | 9.85% | 44 | +5.2 pp | $985 |
| Oregon | Graduated | 9.9% | 45 | +5.3 pp | $990 |
| District of Columbia | Graduated | 10.75% | 46 | +6.1 pp | $1,075 |
| New Jersey | Graduated | 10.75% | 47 | +6.1 pp | $1,075 |
| New York | Graduated | 10.9% | 48 | +6.3 pp | $1,090 |
| Hawaii | Graduated | 11.0% | 49 | +6.4 pp | $1,100 |
| California | Graduated | 13.3% | 50 | +8.7 pp | $1,330 |
| South Carolina | Changed in 2026 | Not printed | n/a | n/a | n/a |
Rates as of January 1, 2026. South Carolina has no printed figure because its top rate changed mid-year, so it is excluded from the median and the ranking rather than given an estimate.
Check Two States Against Your Own Income
The payment below is the same in both states by construction. That is the point.
Texas
- Structure
- None
- Rate
- 0%
- Rank
- 7 of 50
- State tax per $10k
- $0
- IBR payment
- $301
No wage income tax, so nothing is withheld at the state level.
California
- Structure
- Graduated
- Rate
- 13.3%
- Rank
- 50 of 50
- State tax per $10k
- $1,330
- IBR payment
- $301
Top marginal rate applies only above the top bracket, so your effective rate is lower.
Across $10,000 of taxable income the gap is $1,330, and the IBR payment is $301 either way.
Payment assumes a $40,000 balance at 6.5% and a household of 1, held constant so only the state moves. Alaska and Hawaii use higher HHS poverty guidelines in reality, which this estimate does not model.
Where State Tax Does and Does Not Appear
Not in an IDR payment
IBR, PAYE, ICR and RAP are all built from federal AGI minus a multiple of the poverty guideline. The state revenue code never enters the arithmetic.
Not in a DTI ratio
A refinance lender divides gross monthly income into monthly debt. Withholding is not subtracted, so a high-tax state does not make your ratio look worse.
In your actual budget
It is real money out of the account each pay period. At 13.3% in California, every $10,000 of taxable income leaves $1,330 with the state, against nothing in the nine no-income-tax states.
The Same Borrower in Five States
At $60,000 of AGI, the IBR payment does not move. The last two columns do.
| State | Rate | IBR payment | State tax per $10k | Extra vs no-tax |
|---|---|---|---|---|
| Texas | 0% | $301 | $0 | baseline |
| Arizona | 2.5% | $301 | $250 | +$250 |
| Illinois | 4.95% | $301 | $495 | +$495 |
| Minnesota | 9.85% top | $301 | $985 | +$985 |
| California | 13.3% top | $301 | $1,330 | +$1,330 |
Same $60,000 AGI, $40,000 balance at 6.5%, household of 1. RAP at the same AGI works out to $300 in every state listed.
What This Page Cannot Tell You
- Your actual state tax bill. The rate shown is a flat rate or a top marginal rate. Real bills depend on state deductions, exemptions, bracket widths and credits.
- Local income taxes. A number of states let cities or counties levy their own income tax on top of the state rate. The table is state level only.
- Whether your state taxes forgiven debt. Federal treatment is settled; state treatment is not uniform. Ask the state revenue department.
- Cost of living, property tax and sales tax. Comparing income tax alone is misleading. If you are weighing a move, use the state income tax comparison instead, which nets out property and sales tax differences.
How These Figures Were Built
- Rates come from the same 2026 Tax Foundation table used by the state guides and the income tax comparison, so the three pages cannot disagree.
- The comparison rate is 0% for a no-income-tax state, the flat rate for a flat state, and the top marginal rate for a graduated state. 50 jurisdictions are ranked; South Carolina is not.
- The median is the midpoint of those 50 values, which is 4.6%.
- Payments use the same module as the repayment scenario matrix: 2026 poverty guideline of $15,960 for one, IBR at 10% of discretionary income capped at the 10-year standard payment.
Frequently Asked Questions
Does my state income tax change my IBR, PAYE or RAP payment?
No. Income-driven plans and the Repayment Assistance Plan calculate the payment from your federal adjusted gross income, household size and the poverty guideline for your household. Your state income tax rate is not part of that formula, so a borrower with the same AGI pays the same amount in every state. One technical exception: Alaska and Hawaii have their own higher HHS poverty guidelines, which can lower the payment slightly. This page uses the 48-state guideline throughout.
Does state income tax lower the income a lender uses for DTI?
No. Debt-to-income ratios are built from gross monthly income before any tax is withheld, so state income tax does not reduce the income a refinance lender counts. It does reduce the cash you actually have each month, which is why a state with a high income tax can feel tighter without showing up anywhere in the underwriting numbers.
Is forgiven student loan debt taxable in my state?
Federal tax on discharged student loan debt was excluded permanently, but state treatment is a separate question. Some states automatically follow the federal exclusion, and a smaller number have taxed discharged amounts in the past. Because the rules differ by state and change with each legislative session, confirm your own situation with your state revenue department rather than relying on a general statement.
Why is South Carolina not ranked?
South Carolina moved its top marginal rate during 2026, and published tables disagree about which figure they are quoting. Rather than print a number that might be wrong, this page and the state guides leave South Carolina unranked and excluded from the median. Check the South Carolina Department of Revenue for the current rate.
Is the "per $10,000" figure my actual state tax bill?
No. It is a marginal figure: the tax on each additional $10,000 of taxable income at the rate shown. A real state tax bill also depends on that state's standard deduction, personal exemptions, bracket widths, credits and any local add-ons, none of which this page models. Use it to compare states with each other, not to predict a refund.