Geography has a lot to do with personal finance, and where you live in the United States has an impact on your annual tax burden. While federal income taxes are assessed in a consistent manner coast to coast, state and municipal taxes, such as sales and property taxes, vary widely.
"The suburbs of New York City, both in New York and surrounding states, have traditionally the highest property taxes in the country in real dollars," says Mark Ryan, an independent Realtor in Ann Arbor, Michigan. "Even as a percentage of home purchase price, these areas remain near the top."
Not surprisingly, the highest property taxes surround the biggest cities.
The highest average property taxes in the country:
- Westchester County, New York: $9,647 annually.
The lowest property taxes:
- Twenty-four counties came in under $250 a year; those almost all were in the states of Alabama and Louisiana.
Sales taxes in the U.S. are levied by state, county and municipal governments, affecting the price you pay for goods and services in different parts of the country.
Some of the highest combined state and local sales taxes:
- Chicago, Illinois and Long Beach, California: 10.25 percent
- Birmingham and Montgomery, Alabama and Baton Rouge and New Orleans, Louisiana: 10 percent
- Seattle and Tacoma, Washington: 9.6 percent
At the other end of the scale:
- Portland, Oregon, and Anchorage, Alaska, have no state or local sales taxes.
- Richmond, Virginia has 5.3 percent state sales tax.
- Honolulu, Hawaii, has a low sales tax rate of 4.5 percent, but the tax applies broadly to goods and services when compared with sales tax from other locations.
Income and other taxes
Each city is naturally affected by taxes levied by its state government. States set income taxes, general sales taxes, various excise taxes, such as on gasoline, and general property and estate taxes. Several states have municipal-level income taxes in addition to state-level tax. The highest state income taxes per capita are in:
- New York: $2,699
- Connecticut: $2,162
- Maryland $2,097
Eight states collect no tax on income. As of publication, these are Alaska, Florida, Nevada, South Dakota, Texas, Tennessee, Washington and Wyoming. New Hampshire does not tax earned income but does tax interest and dividend income. According to the Tax Foundation, cities with the highest combined state and local tax burdens are located in:
- Connecticut: $7,869
- New York: $6,993
- New Jersey: $6,926
Cities with the lowest combined state and local tax burdens are located in:
- Mississippi: $2,742
- Tennessee: $2,805
- Louisiana: $2,950
The U.S. national average is $4,420.
Sales tax deductions
When you file your federal tax return, you can choose between taking a standard deduction or itemizing your deductions. The standard deduction simplifies tax preparation. It's easy to claim, and you do not need to support it with worksheets, receipts and other documentation. The standard deduction provides an average amount you might claim using itemized deductions, which can include sales tax. Sales tax is included in the itemized deduction category of state and local taxes. Beginning in 2018, the total amount of deductible state and local taxes is limited to $10,000 per year.
It may not be worth the effort if you are only claiming sales tax, but combined with your other itemized deductions and considering your city and state sales tax rules, you may want to investigate which deduction method works best for you, since you can't claim both standard and itemized deductions. TurboTax helps you review various scenarios come tax time and recommends the choice that offers the biggest tax savings.
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