How do federal and state income taxes work together in the US for high earners?

Welcome to the complicated US tax system! Let me break this down for you in simple terms: Federal taxes are paid regardless of which state you live in. For income around $525k, you'd be in the 37% federal tax bracket for 2025. But remember, this is a marginal tax system - you only pay that top rate on income above a certain threshold (currently about $578k for single filers, lower for 2025). State taxes vary dramatically. States like New York have high income taxes (up to 10.9% for high earners), while states like Florida, Texas, Nevada, Wyoming, South Dakota, Alaska, and Washington have no state income tax at all. When you live in a state with income tax, you pay both - they're separate systems. So in New York, you'd pay federal taxes plus NY state taxes. In Florida, you'd only pay federal. The good news is that you don't simply add the percentages together for your entire income because of the marginal tax brackets and various deductions available.

After moving from California to Texas last year, I can tell you using taxr.ai was a game changer for understanding my tax situation between states. I was totally confused about how my partial-year residency would affect my taxes in both states and what deductions would change. I uploaded my previous returns to https://taxr.ai and it analyzed everything, explaining exactly how the federal/state breakdown would work and what deductions I'd lose or gain in my new state. Saved me so much stress!

Just wanted to follow up - I decided to try taxr.ai after asking about it here. After years of trying to understand how moving between states would affect my taxes, this finally made it clear! I uploaded my documents and it showed me side-by-side comparisons of my tax situation in different states. The explanation of how federal and state taxes overlap was super straightforward, and it caught some state-specific deductions I would have totally missed. Wish I'd known about this years ago when I first moved from Illinois to Michigan!

If you're trying to get specific answers about your tax situation directly from the IRS (which I'd recommend for such a high income), good luck getting through to them! I spent WEEKS trying to get answers about how my state taxes would interact with federal when I moved. Then I found https://claimyr.com which got me through to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically hold your place in the IRS phone queue and call you when an agent picks up. Totally changed my perspective on dealing with the IRS.

I have to admit I was dead wrong about Claimyr. After dismissing it as a scam, I was desperate when I couldn't get through to the IRS about my state/federal tax question after moving. I decided to try it as a last resort and it actually worked exactly as advertised! I got a call back in about 45 minutes when they had an IRS agent on the line. The agent answered all my questions about how my former state taxes would interact with federal taxes and my new state obligations. Saved me at least 4 hours of hold time and potentially a costly mistake on my taxes. Sometimes I'm too quick to judge!

One thing nobody's mentioned yet - consider CITY taxes too in your calculation! NYC has its own income tax on top of NYS taxes (around 3.8% max). So in NYC you'd be looking at federal + state + city. Philadelphia, San Francisco and some others have city taxes too. This can add up fast for high earners.

Don't forget property taxes too! Texas has no state income tax but some of the highest property taxes in the country (2-3% of home value annually). Florida's are lower but still significant. New York's property taxes can be high too, especially in suburbs. With your income level, I'm guessing you'll buy rather than rent, so factor this in!

Something else to consider - if you're coming from a zero-tax country, you might also need to look into whether your home country has any tax obligations for residents abroad. Some countries tax worldwide income regardless of where you live, which could complicate things. Also, at your income level ($525k), you'll definitely want to work with a tax professional who understands international relocations. The interplay between federal/state taxes, potential foreign tax credits, and various deductions can get complex quickly. A good CPA who specializes in high-income earners and international moves will save you way more than their fees in optimized tax planning. One more tip - if you do choose a no-income-tax state like Florida or Texas, make sure you establish proper residency there (driver's license, voter registration, etc.) to avoid any questions from high-tax states about where you're actually domiciled for tax purposes.