What's the Difference Between Federal Income Tax and State Income Tax?

Most Americans owe both federal income tax and state income tax, but the two are separate tax systems with their own rates, rules, and forms. Federal income tax is collected by the IRS and applies to all U.S. residents regardless of where they live, with rates ranging from 10% to 37% depending on income. State income taxes vary widely — nine states have no income tax at all (including Texas, Florida, and Nevada), while others have rates ranging from under 2% to over 13%. States generally start with your federal adjusted gross income or taxable income and then apply their own rules for deductions and credits. Many people are surprised that filing a federal extension doesn't automatically extend your state return — most states have their own extension process and deadlines that you need to follow separately.