Taxes. They’re an unavoidable reality that we all must face. But not all taxes are created equal. Depending on which state you live in, you could be paying significantly more or less in overall taxes than your neighbor one state over. With tax season just around the corner, it’s important to understand how where you live impacts your tax burden. In this extensive blog post, we’ll explore key differences in tax structures across the U.S. and what that means for your bottom line.
Income Taxes Vary Greatly by State
When it comes to taxes, income taxes tend to get the most attention. Federal income tax rates are uniform across the country, but state income tax rates and structures can vary greatly. Nine states have no income tax at all, while California has the highest top marginal income tax rate at 12.3%. This disparity can make a major difference in how much of your hard-earned income you get to keep.
For example, if you’re a high earner living in California, you could pay up to 12.3% of your income in state taxes alone. But if you lived in Florida or Texas, you’d pay nothing in state income taxes. That’s a huge potential savings of thousands of dollars per year for top earners. Even neighboring states can have very different income tax burdens. Washington has no income tax, while Oregon’s top rate is 9.9%. If you live and work on opposite sides of the border, you could face very different tax bills each year.
New Hampshire also tax dividend and interest income. Nine states levy no taxes on wage income or salaries, but do tax investment income. Eleven states have a flat income tax. Understanding exactly what types of income are taxed and at what rates is crucial in each state. It can really optimize your tax planning strategies.
| State | Income Tax Brackets (2023) | Top Marginal Rate |
|---|---|---|
| Alabama | 2%, 4%, 5% | 5% |
| Alaska | None | None |
| Arizona | 2.5% | 2.5% (flat rate) |
| Arkansas | 0%, 2%, 3%, 3.4%, 4%, 4.7% | 4.7% |
| California | 1%, 2%, 4%, 6%, 8%, 9.3%, 10.3%, 11.3%, 12.3% | 12.3% |
| Colorado | 4.4% | 4.4% (flat rate) |
| Connecticut | 3%, 5%, 5.5%, 6%, 6.5%, 6.9, 6.99% | 7% |
| Delaware | 2.2%, 3.9%, 4.8%, 5.2%, 5.55%, 6.6% | 6.6% |
| District of Columbia | 4%, 6%, 6.5%, 8.5%, 9.25%, 9.75%, 10.75% | 10.75% |
| Florida | None | None |
| Georgia | 1%, 2%, 3%, 4%, 5%, 5.75% | 5.75% |
| Hawaii | 1.4%, 3.2,%, 5.5%, 6.4%, 6.8%, 7.2%, 7.6%, 7.9%, 8.25%, 9%, 10%, 11% | 11% |
| Idaho | 5.8% | 5.8% (flat rate) |
| Illinois | 4.95% | 7.99% (flat rate) |
| Indiana | 3.23% | 3.23% (flat rate) |
| Iowa | 4.4%, 4.82%, 5.7%, 6% | 6% |
| Kansas | 0%, 3.1%, 5.25%, 5.7% | 5.7% |
| Kentucky | 4.5% | 4.5% (flat rate) |
| Louisiana | 1.85%, 3.5%, 4.25% | 4.25% |
| Maine | 5.8%, 6.75%, 7.15% | 7.15% |
| Maryland | 2%, 3%, 4%, 4.75%, 5%, 5.25%, 5.5%, 5.75% | 5.75% |
| Massachusetts | 5% | 5% (flat rate) |
| Michigan | 4.05% | 4.05% (flat rate) |
| Minnesota | 5.35%, 6.80%, 7.85%, 9.85% | 9.85% |
| Mississippi | 5% | 5% (flat rate) |
| Missouri | 0%, 2%, 2.5%, 3%, 3.5%, 4%, 4.5%, 4.95% | 4.95% |
| Montana | 1%, 2%, 3%, 4%, 5%, 6%, 6.75% | 6.75% |
| Nebraska | 2.46%, 3.51%, 5.01%, 6.64% | 6.64% |
| Nevada | None | None |
| New Hampshire | None | None (taxes dividend and interest income only) |
| New Jersey | 1.4%, 1.75%, 2.45%, 3.5%,5.525%, 6.37%, 8.97%, 10.75% | 10.75% |
| New Mexico | 1.7%, 3.2%, 4.7%, 4.9%, 5.9% | 5.9% |
| New York | 4%, 4.5%, 5.25%, 5.85%, 6.25%, 6.85%, 9.65%, 10.3%, 10.9% | 10.9% |
| North Carolina | 4.75% | 4.75% (flat rate) |
| North Dakota | 0%, 1.95%, 2.5% | 2.5% |
| Ohio | 0%, 2.75%, 3.688%, 3.75% | 3.75% |
| Oklahoma | 0.25%, 0.75%, 1.75%, 2.75%, 3.75%, 4.75% | 4.75% |
| Oregon | 4.75%, 6.75%, 8.75%, 9.9% | 9.9% |
| Pennsylvania | 3.07% | 3.07% (flat rate) |
| Rhode Island | 3.75%, 4.75%, 5.99% | 5.99% |
| South Carolina | 0%, 3%, 4%, 5%, 6%, 6.5% | 6.5% |
| South Dakota | None | None |
| Tennessee | None | None |
| Texas | None | None |
| Utah | 4.95% | 4.95% |
| Vermont | 3.35%, 6.6%, 7.6%, 8.95% | 8.95% |
| Virginia | 2%, 3%, 5%, 5.75% | 5.75% |
| Washington | None | None (taxes dividend and interest income only) |
| West Virginia | 2.36%, 3.15%, 3.54%, 4.72%, 5.12% | 5.12% |
| Wisconsin | 3.54%, 4.65%, 5.3%, 7.65% | 7.65% |
| Wyoming | None | None |
Property Taxes Hit Some States Harder Than Others
For homeowners, property taxes can be one of the biggest tax burdens after income taxes. And again, where you live makes a huge difference. The average effective property tax rate ranges from 0.29% in Hawaii to 2.47% in New Jersey. That means a home valued at $300,000 would face anywhere from $870 to $7,410 in annual property taxes depending on the state.
In Texas, property tax rates average around 1.74%, costing that same $300k homeowner over $5,220 per year. But right next door in Louisiana, property tax rates are just 0.56% on average, costing that homeowner only $1,680 annually. That’s a difference of thousands of dollars each year!
Some states like California also place additional property tax burdens on homeowners through special assessments. And property values themselves can vary greatly by state and region, further complicating things. If affordable property taxes are a priority, it pays to understand the property tax laws in states you’re considering living in.
| State | Effective Property Tax Rate (2023) | Median Property Tax Payment (2023) |
|---|---|---|
| Alabama | 0.41% | $646 |
| Alaska | 1.22% | $3,464 |
| Arizona | 0.62% | $1,648 |
| Arkansas | 0.62% | $878 |
| California | 0.75% | $4,279 |
| Colorado | 0.51% | $2,017 |
| Connecticut | 2.15% | $6,153 |
| Delaware | 0.58% | $1,570 |
| District of Columbia | 0.57% | $3,641 |
| Florida | 0.86% | $2,143 |
| Georgia | 0.90% | $1,850 |
| Hawaii | 0.29% | $1,893 |
| Idaho | 0.63% | $1,682 |
| Illinois | 2.23% | $4,744 |
| Indiana | 0.83% | $1,308 |
| Iowa | 1.57% | $2,522 |
| Kansas | 1.43% | $2,355 |
| Kentucky | 0.85% | $1,320 |
| Louisiana | 0.56% | $983 |
| Maine | 1.28% | $2,722 |
| Maryland | 1.07% | $3,633 |
| Massachusetts | 1.20% | $5,091 |
| Michigan | 1.48% | $2,551 |
| Minnesota | 1.11% | $2,767 |
| Mississippi | 0.79% | $1,052 |
| Missouri | 0.98% | $1,676 |
| Montana | 0.83% | $2,189 |
| Nebraska | 1.67% | $2,916 |
| Nevada | 0.55% | $1,736 |
| New Hampshire | 2.09% | $6,036 |
| New Jersey | 2.47% | $8,797 |
| New Mexico | 0.80% | $1,470 |
| New York | 1.73% | $5,884 |
| North Carolina | 0.80% | $1,583 |
| North Dakota | 1.00% | $2,092 |
| Ohio | 1.53% | $2,447 |
| Oklahoma | 0.90% | $1,351 |
| Oregon | 0.93% | $3,022 |
| Pennsylvania | 1.11% | $2,986 |
| Rhode Island | 1.53% | $4,483 |
| South Carolina | 0.56% | $1,270 |
| South Dakota | 0.86% | $2,028 |
| Tennessee | 0.66% | $1,270 |
| Texas | 1.74% | $3,520 |
| Utah | 0.58% | $1,967 |
| Vermont | 1.90% | $4,570 |
| Virginia | 0.82% | $2,420 |
| Washington | 0.94% | $3,752 |
| West Virginia | 0.59% | $756 |
| Wisconsin | 1.73% | $3,472 |
| Wyoming | 0.61% | $1,442 |
Sales Tax Rates Range from Nil to Sky High
From groceries and clothes to furniture and cars, sales tax can really add up. Once again, sales tax rates are all over the map based on where you live. Five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) have no statewide sales tax at all. Meanwhile Indiana, Tennessee, Mississippi, Rhode Island, and California have rates of around 7%. That’s a difference of hundreds or even thousands of dollars per year in sales taxes paid, depending on your spending.
Some states also exempt groceries and other necessities from sales taxes, while others tax everything under the sun. In New York, clothing items under $110 are sales tax free, exempting some lower cost essentials. But in Minnesota, all clothing is subject to sales tax regardless of price. Details like this can have a sizable impact, especially for large families.
And many cities and counties add their own sales taxes on top of the state rates. Combined state and local rates can reach over 9% in some areas, so it’s a complex web. Doing the math for your personal spending patterns can illuminate how sales taxes will hit your wallet in the places you’re considering living.
| State | State Sales Tax Rate (2023) | Average Combined State and Local Sales Tax Rate (2023) |
|---|---|---|
| Alabama | 4% | 9.24% |
| Alaska | None | 1.81% |
| Arizona | 5.6% | 8.37% |
| Arkansas | 6.5% | 9.44% |
| California | 7.25% | 8.85% |
| Colorado | 2.9% | 7.92% |
| Connecticut | 6.35% | 6.35% |
| Delaware | None | None |
| District of Columbia | 6% | 6.00% |
| Florida | 6% | 7.00% |
| Georgia | 4% | 7.39% |
| Hawaii | 4% | 4.44% |
| Idaho | 6% | 6.00% |
| Illinois | 6.25% | 8.83% |
| Indiana | 7% | 7.00% |
| Iowa | 6% | 6.93% |
| Kansas | 6.5% | 8.75% |
| Kentucky | 6% | 6.00% |
| Louisiana | 4.45% | 9.55% |
| Maine | 5.5% | 5.50% |
| Maryland | 6% | 6.00% |
| Massachusetts | 6.25% | 6.25% |
| Michigan | 6% | 6.00% |
| Minnesota | 6.875% | 7.52% |
| Mississippi | 7% | 7.00% |
| Missouri | 4.225% | 8.36% |
| Montana | None | None |
| Nebraska | 5.5% | 6.97% |
| Nevada | 6.85% | 8.23% |
| New Hampshire | None | None |
| New Jersey | 6.625% | 6.63% |
| New Mexico | 4.88% | 7.60% |
| New York | 4% | 8.53% |
| North Carolina | 6.75% | 6.99% |
| North Dakota | 5% | 7.04% |
| Ohio | 5.75% | 7.24% |
| Oklahoma | 4.5% | 8.98% |
| Oregon | None | None |
| Pennsylvania | 6% | 6.34% |
| Rhode Island | 7% | 7.00% |
| South Carolina | 6% | 7.5% |
| South Dakota | 4.2% | 6.11% |
| Tennessee | 7% | 9.55% |
| Texas | 6.25% | 8.20% |
| Utah | 6.10% | 7.20% |
| Vermont | 6% | 6.36% |
| Virginia | 5.30% | 5.77% |
| Washington | 6.5% | 9.40% |
| West Virginia | 6% | 6.57% |
| Wisconsin | 5% | 5.43% |
| Wyoming | 4% | 5.44% |
Sin Taxes and Fees Vary by Vice
So-called “sin taxes” on alcohol, tobacco, marijuana, and gambling also vary wildly across state lines. These excise taxes are implemented not only to raise revenue, but also to discourage behaviors states deem unhealthy or undesirable. So where you live can greatly impact how much you pay to indulge in various vices.
For example, the cigarette excise tax in New York is $4.35 per pack, but only $0.17 per pack in Missouri. That adds up fast if you’re a smoker, to the tune of thousands per year. Marijuana taxes are complex as well, with some states allowing recreational use and others only medical, and levies ranging from around 10% to 37% of retail value.
Alaska has some of the lowest marijuana tax rates with an excise tax of $50 per ounce. But next door in Washington, taxes on cannabis are over 50% when sales taxes are included! Sin tax differences are important to factor in if you have certain habits or indulgences.
| State | Excise Tax Rate (2023) | Rank |
|---|---|---|
| Alabama | $21.69 | 4 |
| Alaska | $12.80 | 9 |
| Arizona | $3.00 | 43 |
| Arkansas | $8.01 | 20 |
| California | $3.30 | 40 |
| Colorado | $2.28 | 47 |
| Connecticut | $5.94 | 26 |
| Delaware | $4.50 | 34 |
| District of Columbia | $6.68 | (22) |
| Florida | $6.50 | 22 |
| Georgia | $3.79 | 37 |
| Hawaii | $5.98 | 25 |
| Idaho | $12.15 | 10 |
| Illinois | $8.55 | 16 |
| Indiana | $2.68 | 44 |
| Iowa | $14.10 | 7 |
| Kansas | $2.50 | 45 |
| Kentucky | $9.25 | 14 |
| Louisiana | $3.03 | 42 |
| Maine | $11.96 | 11 |
| Maryland | $5.46 | 29 |
| Massachusetts | $4.05 | 36 |
| Michigan | $13.57 | 8 |
| Minnesota | $8.70 | 15 |
| Mississippi | $8.51 | 17 |
| Missouri | $2.00 | 48 |
| Montana | $10.57 | 13 |
| Nebraska | $3.75 | 38 |
| Nevada | $3.60 | 39 |
| New Hampshire | None | None |
| New Jersey | $5.50 | 28 |
| New Mexico | $6.06 | 24 |
| New York | $6.44 | 23 |
| North Carolina | $16.40 | 5 |
| North Dakota | $4.68 | 33 |
| Ohio | $11.38 | 12 |
| Oklahoma | $5.56 | 27 |
| Oregon | $22.86 | 2 |
| Pennsylvania | $7.41 | 21 |
| Rhode Island | $5.40 | 31 |
| South Carolina | $5.42 | 30 |
| South Dakota | $4.87 | 32 |
| Tennessee | $4.46 | 35 |
| Texas | $2.40 | 46 |
| Utah | $15.92 | 6 |
| Vermont | $8.39 | 18 |
| Virginia | $22.06 | 3 |
| Washington | $36.55 | 1 |
| West Virginia | $8.32 | 19 |
| Wisconsin | $3.25 | 41 |
| Wyoming | None | None |
Estate and Inheritance Taxes Target Wealthy Estates
State-level estate taxes and inheritance taxes are easy to overlook, but they can take a huge bite out of large estates. This is especially true in states like Washington and Oregon, which have estate tax exemptions of only $2.2 million and $1 million respectively. Compare that to states like Florida and Arizona that have no estate tax at all.
In Oregon, estates valued over $1 million get taxed up to 16%. So a $5 million estate would face over $600k in state estate taxes alone. However, that same estate would pass tax-free to heirs if located in any of the 21 states with no estate taxes. The difference can run into the hundreds of thousands or millions of dollars for wealthy individuals and families.
So as your assets grow, keep an eye on the estate and inheritance tax laws in your state and where you may want to retire or pass on an inheritance. Proper estate planning and trusts become very important in high tax states.
| State | Estate Tax (2023) | Inheritance Tax (2023) |
|---|---|---|
| Alabama | No | No |
| Alaska | No | No |
| Arizona | No | No |
| Arkansas | No | No |
| California | No | No |
| Colorado | No | No |
| Connecticut | Yes | No |
| Delaware | No | No |
| Florida | No | No |
| Georgia | No | No |
| Hawaii | Yes | No |
| Idaho | No | No |
| Illinois | No | No |
| Indiana | No | No |
| Iowa | Yes | No |
| Kansas | No | No |
| Kentucky | Yes | No |
| Louisiana | No | No |
| Maine | No | No |
| Maryland | Yes | Yes |
| Massachusetts | Yes | No |
| Michigan | No | No |
| Minnesota | No | No |
| Mississippi | No | No |
| Missouri | No | No |
| Montana | No | No |
| Nebraska | Yes | No |
| Nevada | No | No |
| New Hampshire | No | No |
| New Jersey | Yes | No |
| New Mexico | No | No |
| New York | No | No |
| North Carolina | No | No |
| North Dakota | No | No |
| Ohio | No | No |
| Oklahoma | No | No |
| Oregon | Yes | No |
| Pennsylvania | Yes | No |
| Rhode Island | No | No |
| South Carolina | No | No |
| South Dakota | No | No |
| Tennessee | No | No |
| Texas | No | No |
| Utah | No | No |
| Vermont | No | No |
| Virginia | No | No |
| Washington | Yes | No |
| West Virginia | No | No |
| Wisconsin | No | No |
| Wyoming | No | No |
Corporate and Business Taxes Impact Competitiveness
For business owners and investors, corporate income taxes and other business taxes like franchise taxes are an important consideration as well. Just like personal income taxes, corporate tax rates vary across the states. Rates range from about 4% in states like Colorado and Kansas, to 11.5% in New Jersey.
High corporate taxes can drive businesses away, so some states strategically keep rates low to attract new companies and investment capital. Texas has done this successfully, with no corporate income tax and a business-friendly environment. Meanwhile California’s corporate tax rate is 8.8%, amongst the highest nationally. For multi-state businesses or startups choosing a home base, comparing expected corporate and business tax costs is essential. Location has a major bearing on long-term profitability.
| State | Rates (2023) | Brackets |
|---|---|---|
| Alabama | 6.5% | $0 |
| Alaska | 0.0% – 9.4% | $0 – $222,000 |
| Arizona | 4.9% | $0 |
| Arkansas | 1.0% – 5.3% | $0 – $25,000 |
| California | 8.84% | $0 |
| Colorado | 4.40% | $0 |
| Connecticut | 7.5% | $0 |
| Delaware | 8.7% | $0 |
| Florida | 5.5% | $0 |
| Georgia | 5.75% | $0 |
| Hawaii | 4.4% – 6.4% | $0 – $100,000 |
| Idaho | 5.8% | $0 |
| Illinois | 9.5% | $0 |
| Indiana | 4.9% | $0 |
| Iowa | 5.5% – 8.4% | $0 – $100,000 |
| Kansas | 4.0% – 7.0% | $0 – $50,000 |
| Kentucky | 5.0% | $0 |
| Louisiana | 3.5% – 7.5% | $0 – $150,000 |
| Maine | 3.50% – 8.93% | $0 – $3,500,000 |
| Maryland | 8.25% | $0 |
| Massachusetts | 8.0% | $0 |
| Michigan | 6.0% | $0 |
| Minnesota | 9.8% | $0 |
| Mississippi | 4.0% – 5.0% | $5,000 – $10,000 |
| Missouri | 4.0% | $0 |
| Montana | 6.75% | $0 |
| Nebraska | 5.58% – 7.25% | $0 – $100,000 |
| Nevada | None | None |
| New Hampshire | 7.5% | $0 |
| New Jersey (e) | 6.5% – 11.5% | $0 – $1,000,000 |
| New Mexico | 4.8% – 5.9% | $0 – $500,000 |
| New York | 6.50% – 7.25% | $0 – $5,000,000 |
| North Carolina | 2.5% | $0 |
| North Dakota | 1.41% – 4.31% | $0 – $50,000 |
| Ohio | None | None |
| Oklahoma | 4.0% | $0 |
| Oregon | 6.6% – 7.6% | $0 – $1,000,000 |
| Pennsylvania | 8.99% | $0 |
| Rhode Island | 7.0% | $0 |
| South Carolina | 5.0% | $0 |
| South Dakota | None | None |
| Tennessee | 6.5% | $0 |
| Texas | None | None |
| Utah | 4.85% | $0 |
| Vermont | 6.0% – 8.5% | $0 – $25,000 |
| Virginia | 6.0% | $0 |
| Washington | None | None |
| West Virginia | 6.5% | $0 |
| Wisconsin | 7.9% | $0 |
| Wyoming | None | None |
| Washington, D.C. | 8.25% | $0 |
Navigating the Tax Landscape No Matter Where You Live
While it can seem overwhelming, having a solid grasp on how different tax structures impact you based on where you live and work is critical for anyone making financial plans and decisions. And there are always ways to lighten your tax load through credits, deductions, proper planning, and strategies.
For example, putting pre-tax money in 401ks and IRAs, contributing to HSAs, taking advantage of educational credits, and harvesting capital losses can help lower state and federal income tax bills. As the tax filing deadline approaches, take some time to understand how your state and regional tax burden compares to others. That knowledge can help inform everything from retirement relocations to voting and advocacy efforts.
The right mix of taxes allows states and communities to thrive and build vital infrastructure. But unnecessary tax burdens can also stifle growth and opportunity. With vigilance and proper planning, you can navigate the complex U.S. tax landscape no matter where you call home.
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