TurboTax / Tax Calculators & Tips / All Tax Guides / Taxes 101 / States with the Highest and Lowest Taxes

States with the Highest and Lowest Taxes

Updated for Tax Year 2016


OVERVIEW

Where you live can help or hinder your ability to make ends meet. A myriad of taxes -- property, license, state and local sales, property, inheritance, estate and excise taxes on gasoline -- eat away at your disposable income. Weighing the tax landscape against your financial picture lets you stretch your dollars.


House on the water with a long dock and a couple holding hands in the distance

"Location, location, location" applies to more than housing. Where you live can help or hinder your ability to make ends meet.

"It depends on demographics and individual circumstances," says Walter Molony of the National Association of Realtors. "For those relocating for a job, the job is the deciding factor. However, taxes would possibly have some influence on your choice when you're retiring."

A myriad of taxes -- property, license, state and local sales, property, inheritance, estate and excise taxes on gasoline -- eat away at your disposable income. Weighing the tax landscape against your financial picture lets you stretch your dollars.

Personal income tax top 10

The biggest tax ticket citizens face after paying the Internal Revenue Service is the one their state presents. Forty-one states and the District of Columbia levy a personal income tax.

A comparison of 2016 tax rates compiled by the Federation of Tax Administrators ranks California as the top taxer with a 12.3 percent rate, unless you make more than $1 million and have to pay 13.3 percent.

Each of these states has a personal income tax floor, deductions, exemptions, credits and varying definitions of taxable income that determine what a citizen actually pays. The 10 highest income tax states on the FTA's 2016 list were:

  • California 13.3%
  • Oregon 9.9%
  • Minnesota 9.85%
  • Iowa 8.98%
  • New Jersey 8.97%
  • Vermont 8.95%
  • District of Columbia 8.95%
  • New York 8.82%
  • Hawaii 8.25%
  • Wisconsin 7.65%

Ten states with the lowest personal income tax rates

Only seven states have no personal income tax:

  • Wyoming
  • Washington
  • Texas
  • South Dakota
  • Nevada
  • Florida
  • Alaska

Tennessee and New Hampshire limit their tax to interest and dividend income, not income from wages.

Among the states that tax income, Pennsylvania's 3.07 percent flat tax ranks the Keystone State as the tenth lowest in the nation, according to the FTA's 2015 list.

Low personal income tax rates can be misleading; a lack of exemptions and deductions can raise the effective rate you pay. The Retirement Living Information Center says figuring your total tax burden, including sales and property taxes, gives you a more accurate reading on affordability.

"If you're on a fixed income, property taxes become a factor," says the NAR's Molony.

Property taxes

Property tax falls under local, not state, jurisdiction. The most expensive property tax counties in terms of percent of income, according to the Tax Foundation's analysis of the U.S. Census Bureau's 2009 American Community Survey were:

  • Passaic County, New Jersey 8.79%
  • Essex County, New Jersey 8.27%
  • Union County, New Jersey 8.13%

These Louisiana parishes hold the least expensive spots for property tax as a percent of income:

  • Grant Parish 0.26%
  • Assumption Parish 0.26%
  • Vernon Parish 0.25%

Sales tax takers and leavers

If you're a consumer, you'll want to consider that all but five states -- Oregon, New Hampshire, Montana, Delaware and Alaska -- rely on sales tax for revenue. Of these, Alaska also has no income tax, thanks to the severance tax it levies on oil and natural gas production. However, 37 states, including sales-tax-free Alaska and Montana, allow local municipalities to impose a sales tax, which can add up.

Tuba City, Arizona has the distinction of most expensive sales tax city in the country, a 13.725 percent combined state, county and To'Nanees'Dizi tribal rate, according to a Tax Foundation 2012 analysis.

The top five highest total sales tax states as ranked by the Tax Foundation for 2015 were (combination of state and average local sales tax):

  • Tennessee 12%
  • Arkansas 12%
  • Louisiana 11%
  • Oklahoma 11%
  • Arizona 10.73%

Residents of these states pay the least in sales taxes overall:

  • Alaska 1.69%
  • Oregon 0%
  • Delaware 0%
  • Montana 0%
  • New Hampshire 0%

Combined sales and income tax leaders

The Tax Foundation interprets individual tax burden by what taxpayers actually spend in local and state taxes, rather than report these expenses from the state revenue perspective used by the Census Bureau. Its State and Local Tax Burden Rankings study reported that Americans paid an average rate of 9.9 percent in state and local taxes in 2010. According to the foundation, the five highest state-local tax states were:

  • New York 12.8 %
  • New Jersey 12.4%
  • Connecticut 12.3%
  • California 11.2%
  • Wisconsin 11.1%

The same states have ranked as the top three consistently since 2005, according to the foundation. "Lots of people want to relocate for lifestyle issues," says Molony. "Some seek a nicer climate. If all things are equal between climate choices, the tax situation becomes an area worth exploring."

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (1040EZ/1040A) + $0 state offer only available with TurboTax Federal Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: File your 2016 TurboTax Self-Employed return between 4/19/17 and 10/16/17 to receive your complimentary subscription to QuickBooks Self-Employed until 10/31/18. Activation by 12/31/17 required. Sign in to QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/turbotax; e-mail address used for activation and sign-in. Offer valid only for new QuickBooks Self-Employed customers. See QuickBooks.com for price comparison.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not purchase TurboTax Self-Employed by 10/15/18, you will have the option of renewing your QuickBooks Self-Employed subscription by 10/31/18 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2016. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or on-screen); not included with Federal Free Edition (but available for purchase with the Plus bundle). SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. TurboTax experts provide general advice, customer service and product help; tax advice provided only by credentialed CPAs, enrolled agents and tax attorneys. Feature availability varies by device. State tax advice is free. Service, area of expertise, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access, My Docs and My Analysis & Advice features: Access to all tax-related documents we have on file for you is available until you file your 2017 tax return or through 10/31/2018, whichever comes first. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.