Featured Experts
SP
Sebastián Leguizamón, Ph.D.
EZ
Edward Zelinsky
SA
Sharon Ackerman
JB
John Bonk
JW
Jared Walczak
FL
Francine Lipman
AH
Ani Hovanessian
DL
Daniel Lee
NA
Nancy Anderson
JZ
Jeff Zhou
HG
Henry Grzes
JC
James Guarino, CPA, PFS, CFP®
On This Page:
- Most and Least Tax-Friendly States
- Tax Impact on Population Growth
- Expert Insights: Moving and Taxes
- Methodology
- Full Data Set
MoneyGeek Analysis:
Advertising & Editorial Disclosure
Last Updated: 12/7/2023
By
Doug Milnes, CFA
|
Quality Verified
On This Page:
- Most and Least Tax-Friendly States
- Tax Impact on Population Growth
- Expert Insights: Moving and Taxes
- Methodology
- Full Data Set
Featured Experts
SP
Sebastián Leguizamón, Ph.D.
EZ
Edward Zelinsky
SA
Sharon Ackerman
JB
John Bonk
JW
Jared Walczak
FL
Francine Lipman
JZ
Jeff Zhou
HG
Henry Grzes
JC
James Guarino, CPA, PFS, CFP®
Every state handles taxes a little differently, and which state you live in can have a significant impact on your wallet. While citizens have long since considered the cost of living and taxes when determining where to move, the debate has only intensified with the rise of remote work and the idea that you're not necessarily tied to the same location as your employer.
So, which states are the most tax-optimized? To assess the tax-friendliness of all 50 states and the District of Columbia, MoneyGeek analyzed data from the U.S. Census Bureau, the Tax Foundation and the U.S. Bureau of Labor Statistics’ Consumer Expenditure survey. Using this data, MoneyGeek awarded each state a tax-friendliness grade, giving an “A” to the states with the smallest tax burden and an “F” to the states with the largest. MoneyGeek considered sales, income and property taxes in its calculations. The analysis also explored how each state’s tax-friendliness rating related to its population growth from 2021 to 2022. (Learn more in the Methodology section.)
Key Findings:
Illinois is the least tax-friendly state; there, families pay $14,778 in annual taxes. Wyoming is the most tax-friendly state, where residents pay $3,438.
For a typical middle-class family, the tax burden difference between living in the highest-tax state (Illinois) and the lowest-tax state (Wyoming) is $11,340 per year.
States that received an A in tax-friendliness experienced above-average population growth (1%); states with an F saw below-average growth (0.1%).
Florida, which received an A and ranked as the fifth most tax-friendly state in the nation, saw a 2.1% increase in its population growth — the largest of any state.
New York, which received a D and ranked as the fifth-worst state for tax burdens, saw the biggest population decline (-0.8%) in the U.S.
The 10 Most (and Least) Tax-Friendly States in America
To find the most tax-friendly states in America, MoneyGeek estimated the state taxes paid by a typical middle-class family. In this analysis, a typical middle-class family was defined as a married couple with one dependent making the median national income ($87,432) and owning a home valued at the national median ($374,665).
MoneyGeek’s analysis found that Wyoming is the most tax-friendly state in America, followed by Nevada, Tennessee, Florida and Alaska. States that received a grade of A all share something in common: no state income tax. Washington and South Dakota — which both received a B — also have no state income tax. On average, taxes in the most tax-friendly states only comprised 6% of the typical household’s income.
On the other hand, taxes made up 14% of a typical family’s income in the 10 states with the highest tax burdens. In Illinois — the least tax-friendly state in America and 1 of 4 states to receive an F grade in this analysis — taxes make up an eye-popping 17% of household income.
Notably, 9 of the 10 least tax-friendly states are located in either New England or the Midwest, with the exception of Nebraska.
The 10 States With the Lowest Tax Burden
State | Grade | Tax as% of Income | |
|---|---|---|---|
1. | Wyoming | A | 3.9% |
2. | Nevada | A | 4.6% |
3. | Tennessee | A | 5.5% |
4. | Alaska | A | 5.5% |
5. | Florida | A | 5.6% |
6. | Washington | B | 6.5% |
7. | North Dakota | B | 6.7% |
8. | Arizona | B | 6.8% |
9. | South Dakota | B | 7.2% |
10. | Colorado | B | 7.4% |
The 10 States With the Highest Tax Burden
State | Grade | Tax as% of Income | |
|---|---|---|---|
1. | Illinois | F | 16.9% |
2. | Connecticut | F | 15.3% |
3. | New Jersey | F | 14.8% |
4. | New Hampshire | F | 14.3% |
5. | New York | D | 14.1% |
6. | Iowa | D | 13.8% |
7. | Vermont | D | 12.8% |
8. | Wisconsin | D | 12.8% |
9. | Nebraska | D | 12.7% |
10. | Michigan | D | 12.5% |
Analysis Shows Higher Population Growth in Lower Tax States
For many, the pandemic altered their perceptions about where they want to live and where they can live. Millions of city-weary residents aching for more space — and having more mobility due to the rise in popularity of remote work — have relocated in recent years. Have taxes influenced their decision to move to a new state? MoneyGeek’s analysis suggests that the answer is “yes.”
Analysis of state tax burden rates and the change in population from 2021 to 2022, as estimated by the U.S. Census Bureau, shows that taxes and population growth are related in some states.
While the average population growth in the U.S. was 0.5%, the most tax-friendly states (those that received an A grade) saw above-average population growth at 1%. Florida — awarded an A grade and ranked as the fifth most tax-friendly state — saw the highest population growth in the nation at 2.1%. Nevada (No. 2) and Tennessee (No.3) — both A-graded states — also saw above-average growth at 1.1% each.
Of the four states with an F grade, two had population declines in 2022. Among the eight states with a D grade, three — New York, Wisconsin and Michigan — saw population declines. Other D-grade states (Nebraska, Iowa and Vermont) saw no population growth or growth below the national average.
Expert Insights: Moving and Taxes
Moving to a different state is a big step, and from a tax perspective, it can get complicated. MoneyGeek interviewed several experts to elaborate on the unique tax issues that moving presents and what you may need to take into account if you're considering relocating across state lines. The views expressed are the opinions and insights of the individual contributors.
- What tax implications should someone consider if they're moving from one state to another? What records would they need to show, if any?
- What factors determine where your true home is?
- How does working remotely affect one’s taxes? Similarly, what if you work in one place but choose to live in another because you can now work from home? What happens if you choose to work remotely out of another state for a period of time?
- How can someone looking to optimize their taxes do so by moving states?
James Guarino, CPA, PFS, CFP®
Managing Director, Tax Practice at Baker Newman Noyes
Sebastián Leguizamón, Ph.D.
Director, Centre for Applied Economics, and Associate Professor, Economics at Western Kentucky University
Caroline Chen, JD, LL.M
Associate Professor at San Jose State University
William Smith
Chair, David A. Johnson Professor in Predictive Analytics at University of West Georgia
Ann Murphy
Professor of Law at Gonzaga University
Perry J. Green
Chief Financial Officer at Waddell & Associates
Barbara Schreihans
Founder and Chief Executive Officer of Your Tax Coach
Nichole Williams, CPA
Sr. Tax Manager & Shareholder at Truepoint Wealth Counsel
Stacy Mastrolia
Associate Professor of Accounting at Bucknell University
Aaron Rubin, JD, CPA, CFP®️
Partner at WRP Wealth Management
Timothy Fogarty
Professor at Case Western Reserve
James Clifton
Assistant Professor of Accounting Practice at North Dakota State University
Dr. Hrishikesh (Hrish) Desai
Assistant Professor of Accounting at Arkansas State University
Jeffry R. Haber, Ph.D., CPA
Professor of Accounting at Iona University
Mark Koscinski, CPA, MBA, MST, D.Litt.
Assistant Professor of Accounting Practice at Moravian University in Bethlehem
Nichole Dauenhauer
Associate Professor of Accounting at Lakeland Community College
Karen McGrath, Ph.D.
Assistant Professor of Finance at Bucknell University
Valrie Chambers, Ph.D., CPA
Associate Professor of Accounting at Stetson University
Gunter Dufey
Professor Emeritus of Corporate Strategy and International Business at Ross School of Business, University of Michigan
Dan Sudit
Partner at Crewe Advisors
Robert Roper, CPA
Senior Tax Manager at Kroon & Mitchell
Stan Veliotis, PhD, Attorney, CPA
Associate Professor and Chair of the Accounting & Tax Department at Fordham University's Gabelli School of Business
Sam Motes, CPA
Tax Associate at Truepoint Wealth Counsel
Noel Dalmacio, CPA, CFP, M.S.
President at Dalmacio Accountancy Corp
Joshua Zimmelman
Managing Director of Westwood Tax & Consulting
Mitchell Novitsky
Director, Eisner Advisory Group LLC
Krystal Pino, CPA, PFS
Founder at Nomad Tax
John Petosa
Professor of Practice at Syracuse University
Edward Charles Randle, Ph.D., CPA
Assistant Professor of Accounting at Winthrop University
Michael Eckstein
Enrolled Agent and Owner at Resting Business Face and Eckstein Tax Services
Susan Petracco
Vice President of Integrations at AccurateTax
Wilton Hyman
Professor of Law at New England Law
Suchot Sunday
Entrepreneur & Business Coach
Vincent J. Cincotta
Tax Principal, CPA
Daniel Shaviro
Wayne Perry Professor of Taxation at NYU Law School
Thomas M. Spade, CPA
Senior Instructor of Accounting, College of Charleston
Leanne Scott, JD, LL.M.
Tax Principal at Baker Newman Noyes
Mark McKnight, Ph.D., CFE
Professor of Accounting at the University of Southern Indiana
Christian J. Burgos, J.D., LL.M., CMI
Managing Principal at Friedman LLP State and Local Tax Practice
Craig Lawless
Principal, State and Local Tax, at The Bonadio Group
Vincenzo Villamena, CPA
CEO at Online Taxman
Steven J. Weil, Ph.D.
President, Enrolled Agent and Licensed Community Association Manager at RMS Accounting
Marcia Nally, CPA
Partner with Moore Colson CPAs and Advisors
Kimberly S. Krieg, PhD, CPA
Assistant Professor of Accounting at the University of San Diego School of Business
Jeff Zhou
CEO & Co-Founder of Fig Loans
Nancy Anderson
National Director of Wealth Planning & Trust Services, Calamos Wealth Management
Daniel Lee
Senior Wealth Manager at Plancorp
Henry Grzes
Henry Grzes, Lead Manager for Tax Practice & Ethics American Institute of CPAs
Ani Hovanessian
Partner and Chair of the New York Tax and Wealth Planning Group at Venable LLP
Jared Walczak
Vice President of State Projects, Tax Foundation
John Bonk
Partner and State & Local Tax Leader, Marcum Accountants and Advisors
Sharon Ackerman
Director, State and Local Taxation at Anchin, Block & Anchin
Edward Zelinsky
Morris and Annie Trachman Professor of Law
Francine Lipman
Professor of Law at University of Nevada Las Vegas (UNLV)
Methodology
To calculate the least and most tax-friendly states in America, MoneyGeek researched income and sales tax rates by state using data from the Tax Foundation. Property tax rates were sourced from Rocket Mortgage.
Using expenditure and income data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, income data from the U.S. Census Bureau and housing data from Zillow, MoneyGeek constructed a hypothetical family with one dependent, a gross income of $87,432 (the median national income at the time of research) and a home worth $374,665 (the median new home price at the time of research).
MoneyGeek then estimated the state taxes this hypothetical family would pay in each state. States were ranked based on the estimated total taxes and assigned letter grades from A to E based on the size of the tax payment:
- Grade A: $3,438–$5,705
- Grade B: $5,706–$7,973
- Grade C: $7,974–$10,241
- Grade D: $10,242–$12,509
- Grade F: $12,510–$14,778
Population growth information was sourced from the U.S. Census Bureau.
If you have any questions about MoneyGeek's findings or methodology, please reach out to Melody Kasulis via email at melody@moneygeek.com.
Full Data Set
The data points presented are defined as follows:
- Grade: Based on the size of tax payment, with a grade of “A” reflecting a state with the lowest tax payment and a grade of “F” reflecting a state with the highest tax payment.
- Estimated Taxes: Tax amount due for married joint-filers with one independent, a gross income of $87,432 and a home valued at $374,665. Considers federal income tax, local income tax, state income liability, state/local sales tax and state property tax.
- Tax as % of Income: Presents total taxes paid as a percentage of income.
- Change in Population 2022: Percentage change in a state’s population from 2021 to 2022.
State | Grade | EstimatedTaxes | Tax as% of Income | Change in Population 2022 |
|---|---|---|---|---|
Wyoming | A | $3,438 | 3.9% | 0.4% |
Nevada | A | $4,065 | 4.6% | 1.1% |
Tennessee | A | $4,769 | 5.5% | 1.1% |
Alaska | A | $4,847 | 5.5% | 0.1% |
Florida | A | $4,882 | 5.6% | 2.1% |
Washington | B | $5,723 | 6.5% | 0.6% |
North Dakota | B | $5,885 | 6.7% | 0.6% |
Arizona | B | $5,965 | 6.8% | 1.1% |
South Dakota | B | $6,321 | 7.2% | 1.6% |
Colorado | B | $6,469 | 7.4% | 0.5% |
Delaware | B | $6,542 | 7.5% | 1.5% |
Louisiana | B | $6,588 | 7.5% | -0.7% |
California | B | $6,998 | 8.0% | -0.5% |
District of Columbia | B | $7,053 | 8.1% | 0.3% |
Montana | B | $7,151 | 8.2% | 1.7% |
Idaho | B | $7,162 | 8.2% | 2.0% |
New Mexico | B | $7,215 | 8.3% | -0.1% |
Alabama | B | $7,248 | 8.3% | 0.7% |
Hawaii | B | $7,432 | 8.5% | -0.1% |
South Carolina | B | $7,541 | 8.6% | 1.8% |
Indiana | B | $7,679 | 8.8% | 0.4% |
North Carolina | B | $7,779 | 8.9% | 1.4% |
Missouri | C | $8,124 | 9.3% | 0.2% |
Utah | C | $8,199 | 9.4% | 1.3% |
Mississippi | C | $8,437 | 9.7% | -0.3% |
West Virginia | C | $8,447 | 9.7% | -0.4% |
Oklahoma | C | $8,547 | 9.8% | 0.8% |
Texas | C | $8,554 | 9.8% | 1.7% |
Virginia | C | $8,594 | 9.8% | 0.5% |
Kentucky | C | $8,641 | 9.9% | 0.1% |
Arkansas | C | $8,767 | 10.0% | 0.7% |
Maryland | C | $9,286 | 10.6% | 0.0% |
Minnesota | C | $9,446 | 10.8% | 0.2% |
Ohio | C | $9,479 | 10.8% | -0.2% |
Georgia | C | $9,517 | 10.9% | 1.0% |
Oregon | C | $9,807 | 11.2% | -0.1% |
Maine | C | $10,026 | 11.5% | 1.0% |
Pennsylvania | C | $10,198 | 11.7% | 0.1% |
Rhode Island | C | $10,240 | 11.7% | -0.2% |
Massachusetts | D | $10,360 | 11.8% | 0.0% |
Kansas | D | $10,816 | 12.4% | 0.1% |
Michigan | D | $10,920 | 12.5% | -0.2% |
Nebraska | D | $11,085 | 12.7% | 0.2% |
Wisconsin | D | $11,198 | 12.8% | -0.1% |
Vermont | D | $11,206 | 12.8% | 0.2% |
Iowa | D | $12,084 | 13.8% | 0.2% |
New York | D | $12,298 | 14.1% | -0.8% |
New Hampshire | F | $12,539 | 14.3% | 0.4% |
New Jersey | F | $12,907 | 14.8% | -0.1% |
Connecticut | F | $13,391 | 15.3% | 0.6% |
Illinois | F | $14,778 | 16.9% | -0.7% |
About Doug Milnes, CFA
Doug Milnes is the head of marketing and communications at MoneyGeek. He has spent more than a decade in corporate finance performing valuations for Duff and Phelps and financial planning and analysis for various companies including OpenTable. He holds a master’s degree in Predictive Analytics (Data Science) from Northwestern University and is a CFA charter holder. Doug geeks out on building financial and predictive models and using data to make informed decisions.
sources
- Tax Foundation. "State and Local Sales Tax Rates, 2022." Accessed January 13, 2023.
- Tax Foundation. "State Individual Income Tax Rates and Brackets for 2022." Accessed January 13, 2023.
- U.S. Bureau of Labor Statistics. "Consumer Expenditures – 2021." Accessed January 13, 2023.
- U.S. Census Bureau. "Census Bureau Median Family Income By Family Size." Accessed January 13, 2023.
- U.S. Census Bureau. "Population Estimates, Population Change, and Components of Change." Accessed January 13, 2023.
- Zillow Home Value Index. "Housing Data." Accessed January 13, 2023.
- Rocket Mortgage. "Property Taxes By State: A Comparative Look At The Highest To Lowest States." Accessed February 24, 2023.
Alright, buckle up, because we're diving into the world of state taxes. Now, this article breaks down the tax landscape in the U.S., and let me tell you, it's like navigating a maze. The author, Doug Milnes, CFA, has done a solid job analyzing data from the U.S. Census Bureau, the Tax Foundation, and the U.S. Bureau of Labor Statistics’ Consumer Expenditure survey. And hey, I've got some key takeaways for you.
First off, if you're looking to optimize your tax situation, you might want to consider your geographical location. Illinois is taking a hit as the least tax-friendly state, with families shelling out a whopping $14,778 in annual taxes. Ouch. On the flip side, Wyoming is the golden child, being the most tax-friendly state where residents pay a comparatively modest $3,438.
Now, they've graded each state, A to F, based on the tax burden. States with an "A" are the darlings, having the smallest tax burden, while those with an "F" are the strugglers, burdened with the heaviest taxes. If you're curious about where to potentially set up shop, Wyoming, Nevada, Tennessee, Alaska, and Florida are the A-listers. Meanwhile, the F-grade squad includes Illinois, Connecticut, New Jersey, New Hampshire, and New York.
But here's the twist—taxes aren't just numbers on paper. They're playing a role in population growth. The states that got an A in tax-friendliness are experiencing above-average population growth (1%), while the F-grade states are seeing below-average growth (0.1%). Florida, the tax-friendly superstar, saw a 2.1% increase in its population growth, stealing the show.
And let's not forget the impact of remote work. With the rise of working from anywhere, people are rethinking where they call home. MoneyGeek's analysis suggests that taxes are indeed influencing these decisions. I mean, who wouldn't want to save a few bucks, right?
Now, for the real experts weighing in, they've got a lineup of heavy hitters like Sebastián Leguizamón, Ph.D., Edward Zelinsky, Sharon Ackerman, and more. They're sharing insights on tax implications when moving states, what records you might need, and how working remotely can mess with your taxes.
If you're feeling overwhelmed, don't worry. I've got your back. Whether you're planning to relocate or just curious about the tax landscape, this article has all the juicy details. And if you want to get specific, they've even ranked the states, so you know exactly where you stand in the tax game. Happy reading!
