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. Data from the American Community Survey from the U.S. Census Bureau indicates 60 percent of counties nationwide reported property taxes between $500 and $1,500 annually, between 2007 and 2011.
The highest 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: 10.25 percent (starting Jan 1, 2016)
- Birmingham and Montgomery, Alabama: 10 percent
- Seattle, Washington: 9.6 percent
- Glendale, Arizona:, 9.5 percent
At the other end of the scale:
- Portland, Oregon, and Anchorage, Alaska, have no state or local sales taxes.
- Arlington, Chesapeake, Norfolk, Richmond and Virginia Beach levy only Virginia's five 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. As of publication, 14 states have municipal-level income taxes in addition to state-level tax. The highest state income taxes per capita are in cities in:
- New York: $1,864
- Connecticut: $1,808
- Massachusetts $1,765
Seven states collect no tax on income. As of publication, these are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. New Hampshire and Tennessee do not tax income but do tax interest and dividend income. According to the Tax Foundation, cities with the highest combined state and local tax burdens are located in:
- Connecticut: $6,984
- New Jersey: $6,689
- New York: $6,375.
Cities with the lowest combined state and local tax burdens are located in:
- Mississippi: $2,625
- Tennessee: $2,707
- Alabama: $2,740
The U.S. national average is $4,112.
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 serves to average the return on the amounts you would claim using itemized deductions, which includes sales tax.
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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