Seven states charge no income tax at all, meaning self-employed workers there only pay the 15.3% federal self-employment tax (SE tax) plus any local business fees. Other states top out at over 13% on high earners. If you're a 1099 contractor, your state tax obligation depends on where you live, where you work, and whether your state has a business or franchise tax. Here's the full 2026 breakdown.
First: the federal self-employment tax (same in every state)
Before diving into state rates, remember that the federal SE tax is identical regardless of your state: 15.3% on the first $168,600 of SE income (Social Security portion) and 2.9% Medicare tax on all SE income with no cap. Half of this (7.65%) is deductible as an adjustment to income on Form 1040. State taxes are calculated after federal adjustments, but most states allow you to deduct a portion of your federal SE tax too.
States with no income tax (the big 7)
These seven states have no state income tax on individual income — including self-employment income. If you live in one of these, your tax burden is the federal SE tax (15.3%) plus any local or business-specific taxes:
| State | Notes for Self-Employed |
|---|---|
| Alaska | No state income tax. Local governments may charge property tax. No state-level SE tax. |
| Florida | No state income tax. Some local jurisdictions charge business privilege fees (e.g., Miami-Dade has a local business tax for certain professions). |
| Nevada | No income tax. Nevada imposes a Commerce Tax on businesses with $4M+ annual revenue (gross, not net). Most freelancers stay below this threshold. |
| New Hampshire | No wage or SE income tax. Taxes only dividend and interest income at 5.1%. Business Profits Tax applies to some entities. |
| South Dakota | No income tax. Very small business tax ($50+ annually for some structures). No state SE tax. |
| Texas | No income tax. Texas imposes a franchise tax (0.375% of gross margin after deduction) on certain business entities. Sole proprietors are generally exempt unless you elect corporate status. |
| Washington | No income tax. Washington imposes a Business & Occupation (B&O) tax on gross receipts for most businesses. The rate varies by classification. Freelancers providing services typically fall under the "Service & Other" classification at 1.5% of gross receipts. |
Important distinction for Washington state: Washington is the only "no income tax" state that still charges a business tax on gross receipts. A freelancer earning $80,000 would owe $1,200 in B&O tax in addition to federal SE tax. Always check your local county and city for additional business license fees.
States with low to moderate income tax (3-6% brackets)
These states have reasonable tax burdens and are popular with freelancers:
| State | Top Rate (2026) | Starting Bracket | Notes |
|---|---|---|---|
| Arizona | 4.5% | $49,321 single | Simplified tax system. Deductions available for federal SE tax paid. |
| Colorado | 4.4% (flat) | All taxable income | Flat-rate income tax. Federal SE tax deduction available. Very friendly to remote workers. |
| Illinois | 4.95% (flat) | All taxable income | Flat rate with personal exemption. Illinois has a $2,350 personal exemption that reduces taxable income. |
| Indiana | 3.15% (flat) | All taxable income | One of the lowest flat rates nationally. Homestead deduction available for qualifying taxpayers. |
| Ohio | 3.9% (max) | $226,100+ single | Progressive but top rate is low. Business income deduction up to 100% of SE income (small business exemption). |
| Utah | 4.85% (flat) | All taxable income | Flat rate with a $580 exemption per dependent. Utah has special pass-through entity deduction (up to 20% of business income). |
| Wisconsin | 7.65% (max, down from 7.9%) | $404,800+ single | Progressive but top rate was reduced for 2026. 20% pass-through deduction available. |
States with high income tax (7-13% brackets)
If you're in one of these states, your effective state tax rate can significantly add to your SE tax burden, especially at higher income levels:
| State | Top Rate (2026) | Top Bracket | Key Details |
|---|---|---|---|
| California | 13.3% | $1,000,000+ | Progressive. California has a 1.1% mental health services tax surcharge on income over $1M. SDI (state disability insurance) adds 0.9% on first $133,040 of SE income. Total effective rate for high earners can exceed 14%. |
| New York | 10.9% | $1,077,550+ | Progressive. New York City residents pay additional local income tax (top 3.876%). Combined NYS + NYC top rate: 14.776%. Freelancers in NYC face the highest combined SE tax burden in the country. |
| Oregon | 9.9% | $125,000+ | No sales tax, but high income tax. Oregon allows a deduction for federal SE tax paid (limited). Tri-County metropolitan area adds a 0.8% transit tax on income over $125K. |
| Hawaii | 11% (max, down from 11.24%) | $200,000+ | Hawaii has high tax rates but also generous deductions and credits. GET (general excise tax) of 0.5% may apply to certain business income. |
| Minnesota | 9.85% | $190,000+ | Progressive. Has a 2% local option for metro areas. Federal SE tax deduction available up to 50% of federal SE tax paid. |
| New Jersey | 10.75% | $5,000,000+ | NJ has a tiered system with 4 brackets. Higher rates kick in at relatively low thresholds ($406,000 for top pre-bracket). NJ also has a 2.5% surcharge on income over $1M (temporarily extended). |
Other state tax considerations for freelancers
Beyond income tax rates, several state-specific rules affect self-employed workers:
State disability insurance (SDI)
California, Hawaii, New York, Rhode Island, and the Virgin Islands require self-employed workers to pay into state disability insurance. Rates and wage bases vary. For example, California's SDI rate is 0.9% on the first $133,040 of SE income in 2026.
Unemployment insurance for self-employed
Most states don't require self-employed workers to pay into state unemployment insurance (SUTA). However, if you hire employees, you must register and pay SUTA taxes on their wages. A few states have voluntary unemployment programs for self-employed workers.
Local business taxes and permits
Many cities and counties charge annual business registration fees or gross-receipts-based taxes on self-employed workers. For example:
- New York City: Business Certificate (formerly Vendor's License) for $50/year. The NYC Business & Industry Department regulates this.
- Philadelphia: Business Income & Receipts Tax (BIRT) with a $10,000 personal exemption for gross receipts under $100,000.
- San Francisco: Business Registration Certificate + gross receipts tax with small business exemption.
- Chicago: Business License Application + annual fees based on revenue tier.
Nexus and multi-state work
If you work remotely for out-of-state clients but live in a different state, you generally only pay tax to your resident state. However, if you physically travel to work in other states, you may create a tax nexus. Since the Wayfair decision (2018), states can also require remote sellers without physical presence to collect sales tax, but this doesn't directly apply to SE income tax.
Example: comparing two freelancers in different states
Let's compare two freelance consultants each earning $100,000 in net SE income (after all Schedule C deductions):
| Tax Component | Austin, TX | Brooklyn, NY |
|---|---|---|
| Federal SE Tax (15.3% first $100K) | $15,300 | $15,300 |
| Federal Income Tax (effective ~18%) | $18,000 | $18,000 |
| State Income Tax | $0 (no state tax) | $8,950 (NY: ~9.2%) |
| NYC Local Tax | $0 | $3,020 (NYC: 3.876%) |
| State SE Tax / SUTA | $0 | $0 (voluntary) |
| B&O / Gross Receipts Tax | $0 (TX franchise exempt) | $0 |
| Total Tax Burden | $33,300 | $45,270 |
| Effective Combined Rate | 33.3% | 45.3% |
The New York-based consultant pays nearly $12,000 more in taxes on identical income. This is why location matters significantly for self-employed workers.
Frequently Asked Questions
Do I need to pay state self-employment tax in addition to the federal 15.3%?
In most states, the 15.3% federal SE tax covers Social Security and Medicare — there's no separate state SE tax. However, some states (California, Hawaii, New York, Rhode Island) require SDI contributions. A few states (Washington, Nevada, Texas) have gross-receipts-based business taxes that effectively add to your burden.
Can I deduct the federal SE tax on my state taxes?
Many states allow a deduction for a portion of your federal SE tax paid. Rules vary: California allows 50% of federal SE tax as a deduction, Oregon allows a limited deduction, and several other states provide some form of SE tax relief. Check your state's specific form instructions.
What about city or county taxes for freelancers?
Many cities require a business registration or license for self-employed workers, even those working from home. Fees range from $50 to $500+ annually. Some cities (Philadelphia, San Francisco, NYC) also impose gross receipts taxes that vary by income tier. Always check with your local finance department.
If I live in one state but work remotely for clients in another, where do I pay tax?
Generally, you only pay income tax to your state of residence. Remote work for out-of-state clients doesn't create a tax nexus in the client's state. However, if you travel to perform services or maintain a physical office elsewhere, you may need to file non-resident returns.
IRS and state sources for verification
Federal SE tax rates come from IRS Publication 946 and IRS Form SE instructions. State tax rates were verified through official state tax agency websites for 2026. For the most current rates, always check your state's department of revenue or taxation website directly, as rates can change mid-year through legislative action.
Planning your 2026 taxes by state
Now that you know your state's rate, take the next step: open the Self-Employment Tax Calculator and plug in your specific numbers. Combined with the Tax Deduction Finder, you can model your full 2026 tax scenario and identify legitimate deductions that reduce both your federal and state burden.