the first question that arises is your state of domicile. it can be defined as the state where you maintain your permanent residence. it becomes complicated because you can be domiciled in state X and perform services for an employer in state Y. in some cases you only file and pay taxes in state X-states X and Y have reciprocal agreements so you only pay taxes in your state of domicile or there may be something in state Y laws that exempts some of or all of the wages you earned there. in other cases, you would need to file income tax returns in both states. however, state X gives you partial or full credit for the taxes paid to Y.
wages is what a business (employer) would pay you for services performed for it. the employer pays 1/2 of the social security and medicare taxes and the other 1/2 is taken out of your paycheck.
self-employment is where you are your own employer/boss. however, you pay both parts of the social security and medicare taxes. the IRS and states generally allow a page 1 deduction for 1/2 of these taxes. there are other advantages and even disadvantages to being self-employed. it's more complicated because as your own employer you can form a corporation. then the corp pays you a salary and for a C-Corp - it pays federal and probably state taxes on any remaining income. An S-Corp also would need to pay you a salary and you also get taxed on the remaining income. Further, some states impose an income tax on the S-Corps remaining income. (Illinois is one of them)
self-employment income is different. there are no interstate reciprocal agreements so if you earned self-employment income in multiple states you are supposed to file an income tax return in each state in which you exceed its filing threshold. generally, to be liable for income taxes on self-employment income in the non-domiciled state you need to be present and perform the services or sell a product in that state and earn more than the filing threshold. But again state laws vary greatly. too complicate state issues further some states and even some cities within a state charge a "sales tax" on certain types of self-employment income in addition to their income tax.
if your only focus is state income taxes why not move to a state that doesn't have them. The states that do not charge a state income tax are Alaska, Nevada, South Dakota, Washington, Texas, Wyoming, and Florida. warning living in those states could have hidden costs which could make it better to live in a state with an income tax.
