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The basics
A state code does not settle what a household is taxed. New York City charges its own progressive income tax on top of New York’s; Columbus charges a flat rate on wages and nothing on a 401(k) withdrawal; Yonkers charges a share of the New York bill itself. Which of those a plan is under changes both what it pays now and whether it goes on paying in retirement.
Illustrative numbers
The same $120,000 salary, two cities
Columbus, working2.5% of wages
Columbus, retired on a pensionnothing
Baltimore City, working3.2% of the state’s base
Baltimore City, retired on a pension3.2% of the state’s base
Two localities with similar headline rates, and only one of them still charging once the wages stop.
Calculation transparency
How it works in MoneyWhatIf
- 01
Each locality carries the base its own law uses: earned income, the state’s taxable income, or a share of the state’s bill.
- 02
An earned-income locality is charged on gross compensation, so a pre-tax 401(k) election does not reduce it the way it reduces the state’s base.
- 03
Local ladders are carried forward at the plan’s inflation like every other schedule, and a couple filing together climbs the wider one where the locality has one.
- 04
The rate for catalog entries marked custom—such as another Ohio municipality or Pennsylvania earned-income-tax jurisdiction—is supplied by the household.
- 05
A locality only applies inside its own state: change the state and the locality is dropped rather than carried.
Keep in mind
Model limits
Resident rates only. Non-resident rates, reciprocity between neighboring jurisdictions, and the credit a city gives for tax paid where somebody works are not modeled.
Income sourced to another state is not charged the household’s locality, which understates the broad-base localities that do tax residents on out-of-state income.
Not every taxing jurisdiction is listed. Where the locality picker offers a custom entry, it can price an unlisted rate; otherwise an absent locality is not modeled.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.