Looking at both the effective and marginal tax rates, you can then understand what your perspective tax looks like. Using examples of a typical household and how the tiered federal tax rate is applied as well as whether your state has a flat, tiered, or no income tax rate will be important in looking at the big picture. There are 7 states with no income tax, and 2 states with no income tax but that do have tax on dividend income and interest. Once reviewing the tax rates that will be applied, it will be important to consider what tax credits and deductions will reduce the actual tax you pay to both Federal and state.