The Best and Worst States for Taxes
Unlike tax rates, tax burdens measure the amount of money taken from your personal income. Tax burdens vary depending on where you live, how much you earn, the property that you own and how you choose to spend your hard-earned paycheck. The different taxes can get confusing and quickly add up, dwindling away your disposable income.
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For example, the Federal Insurance Contributions Act — aka FICA — authorizes a payroll tax that helps fund the Social Security and Medicare programs. When it comes to sales tax, individual states determine which goods and services are taxed. Some states choose not to tax clothing or groceries, whereas others may tax certain products at a lower rate. Many local governments also impose taxes on specific products, which will add to your overall tax bill.
Last updated: May 3, 2021
1. The Best States for Taxes
Looking to live somewhere where taxes won't take too much of a bite out of your finances? Here are the states where you'll keep the most of your money.
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2. Wyoming
Median household income: $64,049
Total taxes paid: $16,605.90
Total tax burden: 25.93%
Total annual income tax paid: $11,977.75
Total annual property tax paid: $1,459.84
Total sales tax paid: $3,168.31
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3. Alaska
Median household income: $77,640
Total taxes paid: $20,511.86
Total tax burden: 26.42%
Total annual income tax paid: $16,007.46
Total annual property tax paid: $3,092.09
Total sales tax paid: $1,412.31
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4. Delaware
Median household income: $68,287
Total taxes paid: $18,197.75
Total tax burden: 26.65%
Total annual income tax paid: $16,510.96
Total annual property tax paid: $1,686.79
Total sales tax paid: $0
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5. Montana
Median household income: $54,970
Total taxes paid: $14,699.59
Total tax burden: 26.74%
Total annual income tax paid: $12,167.21
Total annual property tax paid: $2,532.39
Total sales tax paid: $0
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6. South Dakota
Median household income: $58,275
Total taxes paid: $17.159.76
Total tax burden: 29.45%
Total annual income tax paid: $10,266.04
Total annual property tax paid: $2,867.49
Total sales tax paid: $4,026.24
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7. Tennessee
Median household income: $53,320
Total taxes paid: $15,757.28
Total tax burden: 29.55%
Total annual income tax paid: $8,796.98
Total annual property tax paid: $1,560.41
Total sales tax paid: $5,399.88
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8. West Virginia
Median household income: $46,711
Total taxes paid: $13,881.63
Total tax burden: 29.72%
Total annual income tax paid: $9,451.39
Total annual property tax paid: $632
Total sales tax paid: $3,798.23
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9. Florida
Median household income: $55,660
Total taxes paid: $16,680.69
Total tax burden: 29.97%
Total annual income tax paid: $9,490.99
Total annual property tax paid: $2,735.67
Total sales tax paid: $4,454.02
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10. North Dakota
Median household income: $64,894
Total taxes paid: $19,516.57
Total tax burden: 30.07%
Total annual income tax paid: $12,928.39
Total annual property tax paid: $2,354.43
Total sales tax paid: $4,233.75
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11. Indiana
Median household income: $56,303
Total taxes paid: $17,010.15
Total tax burden: 30.21%
Total annual income tax paid: $11,500.18
Total annual property tax paid: $1,547.53
Total sales tax paid: $3,962.44
12. The Worst States for Taxes
If you live in one of these states, taxes might be a bit of a harder pill to swallow. Here's where your tax burden might be higher than you'd expected.
13. Minnesota
Median household income: $71,306
Total taxes paid: $25,740.46
Total tax burden: 36.10%
Total annual income tax paid: $17,744.91
Total annual property tax paid: $3,260.15
Total sales tax paid: $4,735.40
14. Hawaii
Median household income: $81,275
Total taxes paid: $30,807.28
Total tax burden: 37.9%
Total annual income tax paid: $22,862.54
Total annual property tax paid: $2,386.33
Total sales tax paid: $5,558.41
15. Vermont
Median household income: $61,973
Total taxes paid: $23,523.78
Total tax burden: 37.96%
Total annual income tax paid: $13,759.93
Total annual property tax paid: $5,185.31
Total sales tax paid: $4,578.53
16. Rhode Island
Median household income: $67,167
Total taxes paid: $25,879.20
Total tax burden: 38.53%
Total annual income tax paid: $15,087.28
Total annual property tax paid: $5,514.55
Total sales tax paid: $5,277.37
17. Connecticut
Median household income: $78,444
Total taxes paid: $30,449.58
Total tax burden: 38.82%
Total annual income tax paid: $20,109.97
Total annual property tax paid: $5,416.18
Total sales tax paid: $4,923.43
18. Illinois
Median household income: $65,886
Total taxes paid: $25,726.46
Total tax burden: 39.05%
Total annual income tax paid: $15,783.28
Total annual property tax paid: $4,661.39
Total sales tax paid: $5,281.79
19. Massachusetts
Median household income: $81,215
Total taxes paid: $32,030.49
Total tax burden: 39.44%
Total annual income tax paid: $21,128.95
Total annual property tax paid: $5,783.81
Total sales tax paid: $5,117.74
20. New Jersey
Median household income: $82,545
Total taxes paid: $34,245.66
Total tax burden: 41.49%
Total annual income tax paid: $20,595.69
Total annual property tax paid: $8,790.65
Total sales tax paid: $4,859.32
21. California
Median household income: $75,235
Total taxes paid: $31,685.99
Total tax burden: 42.12%
Total annual income tax paid: $19,037.48
Total annual property tax paid: $4,857.06
Total sales tax paid: $7,791.45
22. New York
Median household income: $68,486
Total taxes paid: $28,900.22
Total tax burden: 42.2%
Total annual income tax paid: $16,762.18
Total annual property tax paid: $4,264.64
Total sales tax paid: $7,873.40
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Jami Farkas contributed to the reporting for this article.
Methodology: To generate the tax bill in every state, GOBankingRates surveyed three key taxes: (1) income taxes at both the Federal and State level (including FICA) (2) property taxes and (3) sales taxes. Incomes are based on 2019 American Community Survey median household figures and income tax estimates were created by using an in-house calculator for a taxpayer who was filing taxes as a single person and using the standard deduction. Property taxes were calculated using each state’s average rate as sourced from Tax Foundation and Zillow’s median home value index data as of March 2021. Sales taxes were calculated using each state’s “state and local combined sales tax rate,” sourced from Tax Foundation, and factored against each state's average annual consumer expenditure. Estimates on annual consumer expenditure in each state were created by taking the Bureau of Labor Statistics' 2019 Consumer Expenditure Survey's national average annual expenditures estimate and factoring it out for each state using the Missouri Economic Research and Information Center’s cost of living indices for 2020. Once the three above taxes were calculated as an annual amount, GOBankingRates found each state's (4) total annual taxes paid and (5) total tax burden. States then were ranked exclusively by factor (5). All data was collected on and up to date as of April 26, 2021.
This article originally appeared on GOBankingRates.com: The Best and Worst States for Taxes
