Question

Curtis just received a raise at work increasing his salary by $8,500. He knows that an increase in salary will increase the amount of federal income taxes withheld from his paycheck. Which of the following statements best describes the effect his raise will have on state income tax withholdings?
a.
State income tax is unrelated to federal, he will see no change in his state withholding.
b.
Since he is having more withheld for federal, he will have less withheld for state so that he pays the same amount in the end.
c.
State income tax is usually a set percentage of federal income tax. With an increase in federal he will see an increase in state withholding.
d.
Since he is making more money, the state government will take advantage of his raise and charge him more income tax. His state withholding will increase.

Answer 1

d.

State income tax is based on your (higher) income, not directly on the federal withholding amount. So if your state has an income tax, a raise will generally increase the state tax withheld. (If you live in a state with no income tax, there would be no change.)