The States are not bound to honor Federal tax treaties, but most do.

State income tax forms usually start with federal taxable income, or federal adjusted gross income, and require a few adjustments. Income excluded by US treaties are usually excluded from States income tax.

However, several States do not honor Federal Tax treaties: if you live or work in one of these states, you will owe State income tax even though your income is exempt from Federal income tax by a treaty.

Those are Alabama, Arkansas, California, Connecticut, Hawaii, Kansas, Kentucky,  Maryland, Mississippi, Montana, New Jersey, North Dakota and Pennsylvania.

It may be excluded for California Tax only if the treaty specifically excludes the income for state purposes. If the treaty does not, California requires the reporting of adjusted gross income from all sources.

The states that do not impose an income tax on individuals are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

States that do not impose an income tax on wages are New Hampshire and Tennessee.

I created this blog to help understand certain basic aspects of U.S. tax law. Of course, each situation is unique and nothing that is on this site will ever replace the expert advice of a tax professional.

Please do not hesitate to contact me should you have any question.

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