In the United States, taxes vary from state to state. If you’re wondering which are the most tax friendly states in America, then this blog article is for you. From Connecticut and New York to Texas and Washington D.C., these six states should be on your shortlist if money is tight or if you just want a break from Uncle Sam’s handout!
The “most tax-friendly states for retirees 2021” is a list of the most tax-friendly states in America. The list includes the top 5 and bottom 5.
Local and state governments are responsible for funding public services and state infrastructure as well as maintaining roads, operating schools, and paying police. The majority of Americans’ extra tax burden is made up of local property taxes, state and local sales taxes, and state and local income taxes.
The way these taxes are handled varies a bit from state to state, and where you reside has a big influence on your finances. Although people have always thought about taxes when deciding whether to relocate or not, the argument has only been hotter in the last year with the advent of remote working and the concept that you aren’t always required to work in the same place as your employer.
However, which states have the best tax policies? MoneyGeek examined all 50 states’ tax burdens to determine which had the lowest rates of sales, income, and property taxes in order to assess the tax-friendliness of each state in the United States.
MonkeyBusinessImages/iStockPhoto is credit for the picture.
A Tax-Related Note
Before the Sixteenth Amendment was passed in 1913, the federal government had only a limited ability to collect taxes. States were given free rein to figure out how to pay for their own governments. The consequence is that every one of the 50 states and the District of Columbia has a distinct tax system. While some states mainly rely on sales taxes, others heavily rely on income taxes. While some governments want to maximize revenue, others try to keep taxes as low as possible.
State Sales Tax Exempt Areas
- Hampshire, New
- Oregon
- Montana
- Delaware
State Income Tax Free States
Tennessee is about to join the seven states that do not tax personal income:
- Alaska
- Wyoming
- Dakota, South
- Florida
- Texas
- Nevada
- Washington
The states with the lowest real estate taxes
The cost of property taxes may add up quickly for homeowners. You may control your home expenses by including taxes into the mortgage calculation. States having the least amount of property taxes are:
- Hawaii
- Alabama
- Colorado
- Louisiana
- Delaware
DepositPhotos.com, source of the image.
Methodology
We looked at state income, sales, and property tax rates in order to determine which states are the least and most tax-friendly. We created a hypothetical household with one dependant, a gross income of $82,852, and a home valued $349,400 using spending and income data from the Bureau of Labor Statistics’ Consumer Expenditure Survey (the median new home price at the time we conducted our research). The state taxes that this hypothetical household would owe in each state were then calculated. We graded the states from A to E according to the magnitude of the tax payment and ranked the states according to the expected total amount of taxes.
A complete list of sources is available here.
The photographer is akaplummer/istock.
Compare Your Annual Tax Bill to Other States’ Tax Bills.
To determine which states are the most tax-friendly, MoneyGeek calculated the state taxes paid by a married couple earning the national median salary of $82,852, having one kid, and owning their $349,400 house. State tax “grades” are arranged from lowest to highest.
Gradyreese provided the photo.
New Jersey 51
- Grade: E
- Taxes anticipated: $11,872
- 14.30 percent of income is taxed.
- 2021 population change: -0.10 percent
Image courtesy of istockphoto user Ultima Gaina.
Illinois 50
- Grade: E
- Taxes anticipated: $13,894
- 16.80 percent of your income is taxed.
- 2021 Population Change: -0.90 percent
Images courtesy of ibsky.
Connecticut 49
- Grade: E
- Taxes anticipated: $12,545
- 15.10 percent of your income is taxed.
- 2021 Pop. Change: 0.10 percent
Denis Tangney Jr., photographer
Wisconsin 48
- Grade: D
- Taxes anticipated: $10,976
- 13.20 percent of your income is taxed.
- 2021 Pop. Change: 0.10 percent
FierceAbin is the photographer.
Vermont 47
- Grade: D
- Taxes anticipated: $10,453
- 12.60 percent of your income is taxed.
- 2021 Pop. Change: 0.50 percent
Denis Tangney Jr., photographer
New York 46
- Grade: D
- Taxes anticipated: $11,495
- Income tax as a percentage of tax: 13.90%
- 2021 population change: -1.60 percent
Eloi Omella is the photographer.
45. Hampshire, New
- Grade: D
- Taxes anticipated: $11,694
- 14.10 percent of your income is taxed.
- 2021 Pop. Change: 0.80 percent
Denis Tangney Jr., photographer
Nebraska (44)
- Grade: D
- Taxes anticipated: $10,446
- 12.60 percent of your income is taxed.
- 2021 Pop. Change: 0.10 percent
Marekuliasz provided the photo.
Michigan 43
- Grade: D
- Taxes anticipated: $10,239
- 12.40 percent of your income is taxed.
- 2021 population change: -0.20 percent
Haveseen provided the photo.
Massachusetts 42
- Grade: D
- Taxes anticipated: $9,771
- 11.80 percent of your income is taxed.
- 2021 population change: -0.50 percent
Rolf 52 provided the photo.
Kansas (41);
- Grade: D
- Taxes anticipated: $10,166
- 12.30 percent of your income is taxed.
- 2021 Population Change: 0.00%
Fotoguy22/iStock is credit for the image.
40. Iowa
- Grade: D
- Taxes anticipated: $11,398
- 13.80 percent of your income is taxed.
- 2021 Pop. Change: 0.10 percent
JoeChristensen provided the photo.
West Virginia, at 39.
- Grade: C
- Taxes anticipated: $7,855
- 9.50 percent of your income is taxed.
- 2021 population change: -0.40 percent
Image courtesy of hkim39 through istockphoto.
Virginia 38
- Grade: C
- Taxes anticipated: $8,083
- 9.80 percent of your income is taxed.
- 2021 Pop. Change: 0.10 percent
Denis Tangney Jr., photographer
37. Utah
- Grade: C
- Taxes anticipated: $7,783
- 9.40 percent of your income is taxed.
- 2021 Population Change: 1.70 percent
Image Source: “4kodiak.”
36. Texas
- Grade: C
- Taxes anticipated: $8,027
- Income tax as a percentage of tax: 9.70%
- 2021 Population Change: 1.10 percent
Denis Tangney Jr., photographer
36. Rhode Island
- Grade: C
- Taxes anticipated: $9,617
- 11.60 percent of your income is taxed.
- 2021 population change: -0.10 percent
Picture Source: danlogan.
33. Pennsylvania
- Grade: C
- Taxes anticipated: $9,542
- 11.50 percent of your income is taxed.
- 2021 population change: -0.20 percent
AppalachianViews, source of the image.
34. Oregon
- Grade: C
- Taxes anticipated: $9,298
- 11.20 percent of your income is taxed.
- 2021 Pop. Change: 0.10 percent
HaizhanZheng provided the photo.
Oklahoma (32).
- Grade: C
- Taxes anticipated: $8,228
- Income tax as a percentage of tax: 9.90%
- 2021 Pop. Change: 0.60 percent
DepositPhotos.com, source of the image.
31. Ohio
- Grade: C
- Taxes anticipated: $8,999
- Income tax as a percentage of tax: 10.90%
- 2021 population change: -0.10 percent
Picture Source: dypics.
North Carolina (30).
- Grade: C
- Taxes anticipated: $7,658
- 9.20 percent of your income is taxed.
- 2021 Pop. Change: 0.90 percent
Photographer: “Darwin Brandis.”
Missouri 29
- Grade: C
- Taxes as estimated: $7,639
- 9.20 percent of your income is taxed.
- 2021 Pop. Change: 0.20 percent
Image Source: eyecrave
Mississippi (28).
- Grade: C
- Taxes anticipated: $8,025
- Income tax as a percentage of tax: 9.70%
- 2021 population change: -0.20 percent
stevegeer provided the image.
31. Minnesota
- Grade: C
- Taxes anticipated: $8,888
- 10.70 percent of your income is taxed.
- 2021 Population Change: 0.00%
JoeChristensen provided the photo.
Maryland 26
- Grade: C
- Taxes anticipated: $8,758
- 10.60 percent of your income is taxed.
- 2021 population change: -0.10 percent
James Lane provided the photo.
25. Maine
- Grade: C
- Taxes anticipated: $9,411
- 11.40 percent of your income is taxed.
- 2021 Pop. Change: 0.70 percent
DepositPhotos.com, source of the image.
Kentucky 24
- Grade: C
- Taxes anticipated: $8,169
- Income tax as a percentage of tax: 9.90%
- 2021 Pop. Change: 0.10 percent
Thomas Kelley provided the photo.
Georgia 23
- Grade: C
- Taxes anticipated: $8,972
- 10.80 percent of your income is taxed.
- 2021 Pop. Change: 0.70 percent
SeanPavonePhoto, author of the photo.
Arkansas 22
- Grade: C
- Taxes anticipated: $8,625
- 10.40 percent of your income is taxed.
- 2021 Pop. Change: 0.50 percent
Image by Rdlamkin.
Washington 21.
- Grade: B
- Taxes anticipated: $5,414
- 6.50 percent of your income is taxed.
- 2021 Pop. Change: 0.30 percent
Image courtesy of 4nadia.
20. Dakota, South
- Grade: B
- Taxes as estimated: $5,938
- 7.20 percent of your income is taxed.
- 2021 Pop. Change: 0.90 percent
Rex Wholster is the photographer.
South Carolina 19.
- Grade: B
- Taxes anticipated: $7,147
- 8.60 percent of your income is taxed.
- 2021 Population Change: 1.20 percent
SeanPavonePhoto, author of the photo.
North Dakota 18.
- Grade: B
- Taxes anticipated: $5,556
- 6.70 percent of your income is taxed.
- 2021 population change: -0.50 percent
Sequential5 provided the photo.
New Mexico 17.
- Grade: B
- Taxes anticipated: $6,921
- 8.40 percent of your income is taxed.
- 2021 population change: -0.10 percent
Picture Source: Davel5957.
Montana 16.
- Grade: B
- Taxes anticipated: $6,700
- 8.10 percent of your income is taxed.
- 2021 Population Change: 1.70 percent
Picture Source: YinYang.
Louisiana 15.
- Grade: B
- Taxes anticipated: $6,556
- Income tax as a percentage of tax: 7.90%
- 2021 population change: -0.60 percent
Denis Tangney Jr., photographer
Indiana 14.
- Grade: B
- Taxes anticipated: $7,258
- 8.80 percent of your income is taxed.
- 2021 Pop. Change: 0.30 percent
The photographer is f11photo.
13. Idaho
- Grade: B
- Taxes anticipated: $7,198
- 8.70 percent of your income is taxed.
- 2021 Pop. Change: 2.90 percent
Knowlesgallery provided the image.
Hawaii 12
- Grade: B
- Taxes as estimated: $6,982
- 8.40 percent of your income is taxed.
- 2021 population change: -0.70 percent
Art Wager provided the photo.
District of Columbia, number 11.
- Grade: B
- Taxes as estimated: $6,626
- Tax as a percentage of Income: 8%
- 2021 population change: -2.90 percent
DepositPhotos.com, source of the image.
Delaware 10.
- Grade: B
- Taxes anticipated: $6,074
- 7.30 percent of your income is taxed.
- 2021 Population Change: 1.20 percent
Image by mdgmorris.
Colorado 9.
- Grade: B
- Taxes anticipated: $6,210
- 7.50 percent of your income is taxed.
- 2021 Pop. Change: 0.50 percent
Jacob Boomsma of istockphoto provided the photo.
Eight. California
- Grade: B
- Taxes anticipated: $6,628
- Tax as a percentage of Income: 8%
- 2021 population change: -0.70 percent
mlauffen provided the photo.
Arizona 7.
- Grade: B
- Taxes anticipated: $5,665
- Income tax as a percentage of tax: 6.80%
- 2021 Population Change: 1.40 percent
Wanderluster, author of the image
Alabama 6.
- Grade: B
- Taxes as estimated: $6,894
- 8.30 percent of your income is taxed.
- 2021 Pop. Change: 0.30 percent
James Deitsch provided the photo.
Wyoming, 5.
- Grade: A
- Taxes anticipated: $3,279
- 4.00 percent of your income is taxed.
- 2021 Pop. Change: 0.30 percent
dschreiber29 provided the photo.
Tennessee 4.
- Grade: A
- Taxes as estimated: $5,377
- 6.50 percent of your income is taxed.
- 2021 Pop. Change: 0.80 percent
Swarmcatcher is the photographer.
3. Nevada
- Grade: A
- Taxes anticipated: $3,879
- 4.70 percent of your income is taxed.
- 2021 Population Change: 1.00 percent
AlizadaStudios, source of the image.
Florida 2.
- Grade: A
- Taxes as estimated: $4,632
- 5.60 percent of your income is taxed.
- 2021 Population Change: 1.00 percent
Elisa.rolle is the photographer.
1. Alaska
- Grade: A
- Taxes anticipated: $4,507
- 5.40 percent of your income is taxed.
- 2021 Population Change: 0.00%
Chilkoot provided the photo.
Analysis Highlights Population Growth in States with Lower Taxes
Many people’s ideas about where they can and should live have changed as a result of the epidemic. Since the beginning of the epidemic, millions of city-dwellers in need of greater space have relocated.
The U.S. Census Bureau’s projection of the population change between 2020 and 2021 and the analysis of state tax burden rates reveals a negative link. In 2021, population growth will be highest when state and municipal taxes are lowest.
Population growth was at or above the national average in four of the five states that received an A for tax friendliness.
Of the states with an E grade, two out of three had population declines in 2021. Of the nine states with a D grade, only two — Hampshire, New and Vermont — had population growth higher than the national average.
Picture source: istockphoto/fizkes.
Important Tax Information
Living in Wyoming, which has the lowest tax burden, saves a typical middle-class family around $10,000 annually compared to Illinois, which has the greatest tax burden. The state-by-state tax situation is broken out as follows:
- The state with the most taxes is Illinois. State and local income, sales, and property taxes for a fictitious middle-class household would total $13,894 annually.
- Wyoming has the lowest revenue. Just $3,279 would be spent by the same household under the same financial circumstances.
- In the centre of the group is Mississippi. State and local taxes for a typical household would total $8,025 per year.
Most likely, you won’t relocate only to escape state and local taxes. Saving for retirement, tracking company costs, and using tax credits and deductions for schooling are all easier methods to reduce your tax burden. However, if you’re considering moving for either personal or professional reasons, thinking about the tax repercussions might assist you make your decision.
Related:
This article originally appeared on MoneyGeek.com and was syndicated by MediaFeed.org.
Supawat Bursuk/Istockphoto provided the image.
Read more from MediaFeed
Photo courtesy of Deposit Photos.
AlertMe
The “states with no income tax” is a list of the states in America that have no income tax. This article will also include the top 3 most tax friendly states in America.
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