The Core Components of a Pay Stub

Before diving into the specifics of state taxes on pay stubs, it helps to understand the structure of a typical pay stub. A standard regular pay stub summarizes your earnings and deductions for a pay period. It includes gross pay, deductions, and net pay. These deductions fall into three categories: statutory, voluntary, and court-ordered. You can learn more about pay stub elements in our Pay Stub Sections Explained guide.

• Statutory Deductions: Legally required withholdings such as federal tax, FICA taxes (Social Security and Medicare), and state taxes on pay stubs.
• Voluntary Deductions: Employee-chosen contributions like insurance or retirement plans.
• Court-Ordered Deductions: Garnishments for child support or debts.

States with No Income Tax: The First Regional Difference

One major regional difference in state taxes on pay stubs is that some states have no income tax at all. As of 2024, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not impose a state income tax. If you work in one of these states, your pay stub will not include a line for state income tax, leading to a higher net pay. However, these states often offset revenue through higher sales or property taxes. For more insight on related deductions, see our article on Social Security on Stubs.

Progressive vs. Flat Taxes: The Two Main Systems

Most states use either a progressive or flat tax system, which determines how much state taxes on pay stubs are deducted.

The Progressive Tax System

A progressive tax system increases rates as income rises. Higher earners pay a greater percentage of income in taxes. On your pay stub, progressive calculations are shown as segmented deductions based on your earnings bracket. States like California and New York use this system. You can read more about how progressive rates interact with FICA deductions in our Employee Deductions Guide.

The Flat Tax System

A flat tax applies a single percentage rate to all taxable income, regardless of earnings. For example, Illinois uses a 5% flat rate, meaning all employees pay the same percentage. This makes the state taxes on pay stubs easier to calculate and verify. To explore flat vs. progressive systems further, check out our Tax Guidelines for Employees.

Reciprocity Agreements: The Multi-State Employee Dilemma

For employees who live in one state but work in another, state taxes on pay stubs can get complicated. Without agreements between states, workers could face double taxation. Reciprocity agreements prevent this by allowing income to be taxed only in the employee’s state of residence. For instance, residents of New Jersey who work in Pennsylvania pay New Jersey state tax only. You can verify reciprocity details using our Employee Financial Guide.

How State Taxes Are Calculated on a Pay Stub

The calculation of state taxes on pay stubs involves determining taxable income, applying allowances, and calculating withholding based on state rules:

1. Start with Gross Pay: Total wages before deductions.
2. Subtract Pre-Tax Deductions: Items like health insurance or retirement reduce taxable income.
3. Apply Withholding Info: Based on your state’s W-4 equivalent and filing status.
4. Calculate and Deduct Tax: Your employer’s payroll system applies state tax rates and records them on your stub.

For accurate payroll calculations, explore our Digital Payroll Tools guide or use a reliable pay stub generator.

Conclusion: A Regional Reality

The structure of state taxes on pay stubs varies widely across the U.S. — from no-income-tax states to those with complex progressive brackets. Knowing how your region’s system works helps ensure accuracy and confidence when reading your pay stub. Review your deductions regularly, understand your state’s tax rules, and refer to our Record-Keeping Tips for Employees to maintain organized payroll records. You can also visit Employee Best Practices for ongoing guidance on payroll accuracy and financial management.