Editor’s note: This story has been updated to correct the tax burden of a median family in Nevada.
(NEXSTAR) –Tax season isn’t really fun for anyone, but some states’ residents have it harder than others this time of year.
As families around the country collect their paperwork and get ready to file, people in Connecticut, Illinois, Iowa and New Jersey may find themselves with a heftier tax bill than their neighbors in other states.
Anupdated analysis by MoneyGeek, a personal finance site, evaluates how “tax friendly” each state is by calculating the tax burden on the average citizen. States with low tax burdens earned an A, while those with the highest tax burden earned Fs.
The state that scored worst overall was Illinois, where taxes represent about 13% of a median family’s income.
Unsurprisingly, the states with no state income taxes at all ended up scoring pretty highly. Those eight states are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
But in some of those states, higher sales tax rates or property tax rates are in place to make up for the lower income tax revenue. Tennessee and Washington have some of the highest sales tax rates in the country, the Tax Foundation says.
According to the updated MoneyGeek analysis, the most “tax friendly” state overall was Nevada, where the median family owes about 3% of its income in taxes.
Meanwhile, 13 states earned either a D or F grade for tax burdens. For some of those states, like Oregon, high personal income tax rates are to blame. In others, like Illinois, high property taxes are a major factor. New Jersey, which earned an F from MoneyGeek, residents have a double whammy of high income and property taxes.
The states with the highest top personal income tax rates are California, Hawaii, New Jersey, Oregon and Minnesota, TurboTax reports, but that doesn't necessarily mean people in those states are getting hit hardest in the end. Each of those states has its own complex set of rules of tax credits, deductions and income floors to pay any state taxes at all.
To conduct the study, MoneyGeek looked at how much a hypothetical family would pay in taxes if they were a married couple with one dependent, a gross income of $94,003 (the median national income at the time of research), and a home worth about $320,900 (the median price of a new home). The lower the taxes on this hypothetical average family, the better the grade.
MoneyGeek’s system of grading states on tax burden only holds true for that hypothetical family. A family who just bought a $1.5 million house in California would probably be paying a lot more in taxes, while a single person who earns $40,000 and is a renter in Texas would pay less.
If you haven't filed taxes yet, you've still got time. The federal deadline to file – or request an extension –is Monday, April 15.
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FAQs
According to the updated MoneyGeek analysis, the most “tax friendly” state overall was Nevada, where the median family owes about 3% of its income in taxes. Meanwhile, 13 states earned either a D or F grade for tax burdens. For some of those states, like Oregon, high personal income tax rates are to blame.
Where is the best place to live for tax purposes? ›
Nevada is the most tax-friendly state, where residents pay $2,949. Illinois is the least tax-friendly state; there, families pay $12,472 in annual taxes. For a typical middle-class family, the tax burden difference between living in the highest-tax state (Illinois) and the lowest-tax state (Nevada) is $9,524 per year.
Does it matter what state you live in for taxes? ›
Your physical presence in a state plays an important role in determining your residency status. Usually, spending over half a year, or more than 183 days, in a particular state will render you a statutory resident and could make you liable for taxes in that state.
What is the best state to be a resident of for taxes? ›
States with the lowest personal income tax rates
- Alaska.
- Florida.
- Nevada.
- South Dakota.
- Tennessee.
- Texas.
- Washington.
- Wyoming.
Very Tax Friendly
- Alaska.
- Florida.
- Georgia.
- Mississippi.
- Nevada.
- South Dakota.
- Wyoming.
New York has the highest state income tax burden out of any other state. In 2020, the state collected income taxes that amounted to 4.7% of per capita personal income, or nearly $3,500 per person. Not far behind are Maryland and Washington, DC.
Where is tax the most expensive? ›
Snapshot. The highest personal income tax rates in 2021-23 were found in Ivory Coast (60%), Finland (56.95%), and Denmark (56.00%).
What are the top 10 tax havens? ›
According to modern studies, the § Top 10 tax havens include corporate-focused havens like the Netherlands, Singapore, Ireland, and the U.K., while Luxembourg, Hong Kong, the Cayman Islands, Bermuda, the British Virgin Islands, and Switzerland feature as both major traditional tax havens and major corporate tax havens.
What place has the cheapest tax? ›
In 2020, the average American contributed 8.9% percent of their income in state taxes. Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).
Can you be a resident of two states at once? ›
You can be a resident of two states at the same time, usually by maintaining a domicile in one state and spending 183 days or more in another. It is not advisable, as you will be liable to file income taxes in both states, rather than in only one.
Eight U.S. states levy no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. One state taxes only interest and dividend income: New Hampshire. Sales, property, and excise taxes can be higher in states with no income tax as a trade-off to fund important government services.
Why is it good to live in a state with no income tax? ›
While nearly everyone must file federal taxes, residents in states without income taxes will benefit from a lower overall tax bill each tax season. This can be a boost to one's financial health.
How to maintain residency in a state while living abroad? ›
Retaining significant financial ties (e.g. holding bank/investment/pension accounts based there) Owning a valid state driver's license or other official ID/registration. Frequently returning to the state or living there for significant periods during the year. Physically working from the state.
Is it possible to not be a tax resident of any state? ›
As a nonresident, you are taxed only on your income from California sources. When you are in California for other than a temporary or transitory purpose, you are a California resident.
How not to be a tax resident? ›
Leaving Australia and becoming a resident of another country for tax purposes. Staying outside Australia for over 183 days in a financial year. Selling or disposing of your Australian assets and investments. Closing all Australian bank accounts and shifting financial assets overseas.
What is the best state to live in to pay the least amount of taxes? ›
Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).
What state has the lowest property taxes? ›
States With the Lowest Property Taxes in 2024
- Hawaii has the lowest property tax rate in the U.S. at 0.29%. ...
- Alabama is generally one of the more affordable states in the country. ...
- Colorado has the third-lowest property tax rate at 0.51%. ...
- Nevada has the fourth-lowest property tax rate in the nation (0.55%).
Alaska is the state with the lowest tax rate, while Illinois is the state with the highest, according to personal finance site WalletHub. In a report released March 5, WalletHub determined the states with the highest and lowest tax rates.
