You may owe state taxes if you have fewer deductions this year. Working with a financial counselor can help lower state and federal tax burdens.
Knowing why you owe state taxes can help you plan ahead to avoid owing next year. You’ll need to file state tax returns alongside federal returns.
Tax Differences and Liabilities
Why do I owe state but not federal taxes? The tax brackets and deductions differ at the state level. So the taxes owed to your state don’t match federal income tax. That’s why you may owe state governments money despite receiving a federal refund.
State income tax rates vary widely. Residents’ entire taxable income is taxed, with credits for taxes paid elsewhere. Most states tax nonresidents’ in-state income.
- Box 16 of your W-2 shows state taxable wages.
- Box 17 is state income taxes withheld.
Life changes altering deductions – like new jobs, contract work, student status shifts, or filing adjustments – may turn a state refund into owed state taxes.
Specific State Tax Information
New Jersey Use Tax
Why do I owe NJ state tax? You owe state tax if you bought something outside New Jersey without paying sales tax. Or if you paid sales tax at a lower rate. Phone assistance answers tax questions.
California Income Tax
California has the highest income tax rate at 13.3%. California taxes residents’ and nonresidents’ state income. The state provides deductions and credits to lower taxes.