One of the biggest tax bills most people pay is the federal income tax calculated on IRS form 1040 each April. Three other major taxes come from your state or locality: state income taxes, sales taxes and property taxes. The way each type of tax is calculated is complicated; factors such as your income level, marital status and county of residence affect your tax rates.
Simple, apples-to-apples comparisons of how much total tax you'll pay living in one state versus another are impossible. And since you pay state income tax on the money you earn, sales tax on the money you spend and property tax on the value of any real estate you might own, you can't simply add up the average rates in each state and rank them from lowest to highest.
However, if you're trying to choose where to live or where to locate your business – and taxes are a factor in your decision – the tables we've created can give you a big picture to use as the starting point for more research on how taxes in each state would affect your unique situation.
Income Tax: On the Money You Earn
State income tax rates are only simple in the few states that either charge no income tax or charge a flat rate no matter what you earn. In other states, the income tax rate you'll pay depends on what income bracket you fall into, and each state sets its own brackets at different income levels. In some states, most taxpayers in the lower and middle classes pay the top rate; in others, you have to earn more than $1 million to pay the highest rate.
The charts below simply list the income tax rate you'd pay in each state if you had the median income in 2012 as calculated by the U.S. Census Bureau. Your state tax bill will also depend on any exemptions, deductions and credits you qualify for – and states differ on what tax breaks they offer and who qualifies.
Here are the 10 best (boldface) and 10 worst (italics) states, along with the 30 states that fall in the middle, for paying state income taxes, whether you file as single or married.
STATE
2014 Income Tax Rate – Singles ($26,989 median income)
STATE
2014 Income Tax Rate – Families ($62,241 median income)
Alaska
0.00%
Alaska
0.00%
Florida
0.00%
Florida
0.00%
Nevada
0.00%
Nevada
0.00%
New Hampshire
0.00%
New Hampshire
0.00%
South Dakota
0.00%
South Dakota
0.00%
Texas
0.00%
Texas
0.00%
Washington
0.00%
Washington
0.00%
Wyoming
0.00%
Wyoming
0.00%
North Dakota
1.51%
North Dakota
2.82%
New Jersey
1.75%
New Jersey
3.50%
Pennsylvania
3.07%
Pennsylvania
3.07%
Arizona
3.36%
Arizona
3.36%
Indiana
3.40%
Indiana
3.40%
Ohio
3.22%
Ohio
3.76%
Vermont
3.55%
Vermont
3.55%
Rhode Island
3.75%
Rhode Island
4.75%
Louisiana
4.00%
Louisiana
4.00%
California
4.00%
California
6.00%
Michigan
4.25%
Michigan
4.25%
West Virginia
4.50%
West Virginia
6.5%
Colorado
4.63%
Colorado
4.63%
Maryland
4.75%
Maryland
4.75%
Kansas
4.90%
Kansas
4.90%
New Mexico
4.90%
New Mexico
4.90%
Alabama
5.00%
Alabama
5.00%
Connecticut
5.00%
Connecticut
5.00%
Illinois
5.00%
Illinois
5.00%
Mississippi
5.00%
Mississippi
5.00%
Utah
5.00%
Utah
5.00%
Nebraska
5.01%
Nebraska
6.84%
Massachusetts
5.25%
Massachusetts
5.25%
Oklahoma
5.25%
Oklahoma
5.25%
Delaware
5.55%
Delaware
6.60%
Virginia
5.75%
Virginia
5.75%
Kentucky
5.80%
Kentucky
5.80%
Georgia
6.00%
Georgia
6.00%
Missouri
6.00%
Missouri
6.00%
Tennessee
6.00%
Tennessee
6.00%
Arkansas
6.00%
Arkansas
7.00%
New York
6.45%
New York
6.45%
Iowa
6.48%
Iowa
7.92%
Wisconsin
6.27%
Wisconsin
6.27%
Montana
6.90%
Montana
6.90%
North Carolina
5,80%
North Carolina
5.80%
South Carolina
7.00%
South Carolina
7.00%
Minnesota
7.05%
Minnesota
7.05%
Idaho
7.40%
Idaho
7.40%
Hawaii
7.60%
Hawaii
7.90%
Maine
7.95%
Maine
7.95%
Oregon
9.00%
Oregon
9.00%
Data : Tax-Rates.org, Income Tax Rates by State, individual pages showing tax brackets for each state linked from http://www.tax-rates.org/taxtables/income-tax-by-state.
Sales Tax: On the Money You Spend
Determining which states have the worst sales tax burden is a little tricky, because the actual sales tax rate you'll pay depends on what city you live in. Still, cities build their sales tax rates on top of state sales tax rates, so it's useful to know the base rate you'll pay to make purchases anywhere in the state.
The chart below ranks the states from lowest to highest in terms of their sales tax burdens, with the 10 best in boldface, the 10 worst in italics, and the 30 middle states in regular type. It also shows what sales tax rate you'll pay in each state's most populous city and how much higher that rate is than the state sales tax rate.
STATE
2014 State Sales Tax %
State's Most Populous City, from 2010 U.S. Census
2014 State + Local Sales Tax % in Most Populous City
Percentage-Point Difference betw. State and Local Sales Tax Rate
Alaska
0.000
Anchorage
0.000
0.000
Delaware
0.000
Wilmington
0.000
0.000
Montana
0.000
Billings
0.000
0.000
New Hampshire
0.000
Manchester
0.000
0.000
Oregon
0.000
Portland
0.000
0.000
Colorado
2.900
Denver
7.620
4.720
Hawaii
4.000
Honolulu
4.500
0.500
South Dakota
4.000
Sioux Falls
6.000
2.000
Wyoming
4.000
Cheyenne
6.000
2.000
Georgia
4.000
Atlanta
8.000
4.000
New York
4.000
New York City
8.880
4.880
Alabama
4.000
Birmingham
9.000
5.000
Louisiana
4.000
New Orleans
9.000
5.000
Missouri
4.225
Kansas City
8.780
4.555
Virginia
4.300
Virginia Beach
6.000
1.700
Oklahoma
4.500
Oklahoma City
8.380
3.880
Utah
4.700
Salt Lake City
6.850
2.150
North Carolina
4.750
Charlotte
7.250
2.500
Wisconsin
5.000
Milwaukee
5.600
0.600
North Dakota
5.000
Fargo
7.500
2.500
New Mexico
5.125
Albuquerque
7.000
1.875
Maine
5.500
Portland
5.500
0.000
Nebraska
5.500
Omaha
7.000
1.500
Ohio
5.750
Columbus
7.500
1.750
Idaho
6.000
Boise
6.000
0.000
Iowa
6.000
Des Moines
6.000
0.000
Kentucky
6.000
Louisville
6.000
0.000
Maryland
6.000
Baltimore
6.000
0.000
Michigan
6.000
Detroit
6.000
0.000
West Virginia
6.000
Charleston
6.500
0.500
Florida
6.000
Jacksonville
7.000
1.000
Vermont
6.000
Burlington
7.000
1.000
Pennsylvania
6.000
Philadelphia
8.000
2.000
South Carolina
6.000
Columbia
8.000
2.000
Massachusetts
6.250
Boston
6.250
0.000
Texas
6.250
Houston
8.250
2.000
Illinois
6.250
Chicago
9.250
3.000
Kansas
6.150
Wichita
7.150
1.000
Connecticut
6.350
Bridgeport
6.350
0.000
Arkansas
6.500
Little Rock
9.000
2.500
Washington
6.500
Seattle
9.500
3.000
California
7.500
Los Angeles
9.750
2.250
Arizona
5.600
Phoenix
8.300
2.700
Nevada
6.850
Las Vegas
8.100
1.250
Minnesota
6.875
Minneapolis
7.780
0.905
Indiana
7.000
Indianapolis
7.000
0.000
New Jersey
7.000
Newark
7.000
0.000
Rhode Island
7.000
Providence
7.000
0.000
Mississippi
7.000
Jackson
8.000
1.000
Tennessee
7.000
Memphis
9.250
2.250
Data s: Retirement Living Information Center, Taxes by State, http://www.retirementliving.com/taxes-by-state; US Census Bureau, United States Census 2010 Population Totals, press releases for each state, various months, 2011, https://www.census.gov/newsroom/releases/archives/2010_census/; Sale-Tax.com, State Sales Tax Rates, http://www.sale-tax.com/.
Property Tax: On the Real Estate You Own
If you plan to own a home, you'll want to know what the property tax rate is in the places you're considering living. But property taxes are established at the local level, not the state level. In some areas, you can cross the street into a different town and pay a dramatically different rate despite living in the same general area with similar amenities and quality of life.
Property taxes are influenced by factors such as homeowners' exemptions, how often property values are reassessed and annual caps on property tax increases, such as California's 2% annual cap under Proposition 13. Also, in some jurisdictions, homeowners' exemptions are only available to taxpayers who fall below an income threshold and/or who qualify as senior citizens; others give these exemptions to any owner who occupies the property as his or her primary residence.
Again, the 10 states with the lowest average property taxes are in boldface; the 10 with the highest are in italics.
STATE
Average Property Tax Rate on State Median Home Value, 2014
Louisiana
0.18%
Hawaii
0.26%
Alabama
0.33%
Delaware
0.43%
West Virginia
0.49%
South Carolina
0.50%
Arkansas
0.52%
Mississippi
0.52%
New Mexico
0.55%
Wyoming
0.58%
Colorado
0.60%
Utah
0.60%
Tennessee
0.68%
Idaho
0.69%
Arizona
0.72%
Kentucky
0.72%
California
0.74%
Oklahoma
0.74%
Virginia
0.74%
North Carolina
0.78%
Georgia
0.83%
Montana
0.83%
Nevada
0.84%
Indiana
0.85%
Maryland
0.87%
Oregon
0.87%
Missouri
0.91%
Washington
0.92%
Florida
0.97%
Massachusetts
1.04%
Minnesota
1.05%
Maine
1.09%
New York
1.23%
South Dakota
1.28%
Iowa
1.29%
Kansas
1.29%
Pennsylvania
1.35%
Rhode Island
1.35%
Ohio
1.36%
Alaska
1.04%
North Dakota
1.42%
Vermont
1.59%
Michigan
1.62%
Connecticut
1.63%
Illinois
1.73%
Nebraska
1.76%
Wisconsin
1.76%
Texas
1.81%
New Hampshire
1.86%
New Jersey
1.89%
Data : Tax-Rates.org, Property Taxes by State, individual pages showing average percentage of home value for each state linked from http://www.tax-rates.org/taxtables/property-tax-by-state.
Other Factors
These charts don't account for the significant percentage of taxes that many people pay to states other than their state of residence. We pay these taxes when we travel or when we earn income in another state. Another factor to consider is that while you might pay higher taxes in one state compared with another, you might also be able to earn more in the higher-taxed state. The question is whether you'll earn enough extra to make up for, or exceed, the cost of the higher tax burden.
Also, while you might initially be drawn to a state that has no income tax or no sales tax, it's important to look at the big picture: States often compensate for lower taxes in one area with higher taxes in another. Government-provided services have to be funded somehow.
Are Low Tax Rates Always a Good Thing?
You might assume that while higher taxes are a pain, they mean you're getting more and better public services for your dollars – smoother roads, higher-ranking public schools and more beautiful parks. But just because government officials have lots of tax dollars at their disposal doesn't mean they're spending them wisely. Similarly, low tax rates don't necessarily mean that public services are lacking. Politicians might be spending tax dollars carefully in those jurisdictions, and they might have turned over to the private sector certain services that the government normally provides.
As with any other purchase, you have to do more research to see what you're actually getting for your money because a higher price (or in this case, a higher tax bill) doesn't always mean better quality, and a lower price doesn't always mean inferior quality.
The Bottom Line
Many states impose similar tax burdens on their residents; if you're considering living in these states, taxes are unlikely to be a deciding factor. But at the high and low ends, there are large differences in tax burdens that could have a real impact on your ability to make ends meet in the short run and to save for the long run.
While tax rates may not be your first or even fifth consideration, sometimes they're the tiebreaker in a close decision. For more details on how to interpret these numbers and use them to make decisions, see States With The Biggest (And Smallest) Tax Burden.