State Income Tax Credits and Tax Withholding

A general overview of state income tax credits and tax withholding. Please check with your specific state if the state offers the tax credit or if you qualify for it. When you prepare your taxes on eFile.com the tax app will provide the tax forms to apply and e-file the state income tax credits.

State Income Tax Withholding

Tax withholding is a form of tax prepayment by the taxpayer and is managed by the taxpayer via form w-4. For example, an employer takes money directly out of a paycheck and sends it to the state on the taxpayer's behalf. If a taxpayer withholds more in taxes than they owe, the state will issue a tax refund. A tax refund is NOT government money, it's a taxpayers money that is the result of too much tax withholding. Each year, tax refunds go unclaimed by taxpayers. Find the tax withholding form for any state and submit it to your employer. Estimate your state income taxes via these state income tax calculators.

State Income Tax Credits

A state income tax credit - or federal tax credit - reduces taxes owed by a dollar-for-dollar amount. For example, if a taxpayer owes $500 in state income taxes and is eligible for a $100 credit, then the taxpayer would only owe $400, or $500 minus $100.

Non-refundable tax credits only reduce the amount of taxes owed, whereas refundable tax credits pay out money beyond what is owed in taxes. For example, if a taxpayer owed $500 and could claim a $600 refundable tax credit, the credit would eliminate all the taxes owed and pay the taxpayer $100. In comparison, a non-refundable tax credit would eliminate the $500 in taxes owed but would not pay the additional $100.

List of State Income Tax Credits

A list of various state income tax credits. They might wary by state.

State Income Tax Credits
State Tax Credit	Tax Credit Description
Earned Income Tax Credit	The EITC is a credit for low-to-moderate-income working individuals and families. Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, Wisconsin, Florida, Louisiana, Maryland, Oklahoma, South Carolina, Virginia, West Virginia, Washington D.C., California, Colorado, Hawaii, Montana, New Mexico, Oregon, Utah, Washington offer the EITC.
Child Tax Credit	CTC in many states (like California or New Jersey) offer a credit for each qualifying child under a certain age. Check with your state if you qualify.
Education Tax Credit	Some states provide tax credit for contributing to a college savings account via the 529 college savings plan.
Renter’s or Property Tax Credit	Maryland, Indiana, California, Michigan, Minnesota, Vermont, Washington, D.C. offer small credits to help renters offset the cost of property taxes passed down by landlords. Certain conditions apply to qualify.
Renter’s Rebate, Deductions	Colorado, Connecticut, Massachusetts offer rebates or deductions. Certain conditions apply to qualify.
Energy Home Credit	Tax credit incentives for installing solar panels or buying an EV to reduce the carbon footprint and to reduce the installation cast.
Adoption Credits	Several states provide adoption credits to help offset adoption costs.

Information about federal or IRS income tax credits.

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