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Multi-State Taxation 2021

States that have an individual income tax follow one of four basic patterns for calculating tax liability on income tax returns for residents.

1) Federal AGI. The first, and most common, pattern is for the state return to begin with federal AGI and then modify federal income by state-specific additions and subtractions. State returns within the federal AGI category may allow:

  •  A deduction for standard or itemized deductions,
  •  A deduction for personal exemptions, and/or
  •  A credit for personal exemptions.

2) Federal taxable income. State returns in the federal taxable income category begin with federal taxable income so the standard or itemized deduction has already been included. Federal income is then modified by state-specific additions and subtractions.

3) State-defined income. A number of state returns do not use a federal starting point; income is included and excluded based on state law. State returns within the state-defined income category may allow:

  •  A deduction for standard or itemized deductions,
  •  A deduction for personal exemptions, and/or
  •  A credit for personal exemptions.

4) Interest/dividend income only. New Hampshire taxes only interest and dividend income and allows a deduction for personal exemptions.

No individual income tax. Alaska, Florida, Nevada, South Dakota, Tennesse, Texas, Washington, and Wyoming do not have an individual income tax.

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