In Which State Are Taxes Paid Less?

Taxes are a necessary evil for most people, but some states have lower tax burdens than others. Depending on your income, property, and spending habits, you may pay more or less taxes in different states. In this article, we will compare the three main types of state taxes: income taxes, sales taxes, and property taxes, and see which states have the lowest rates for each one.

Income Taxes

Income taxes are taxes that you pay on your earnings from wages, salaries, tips, interest, dividends, and other sources. The federal government imposes an income tax on everyone, but some states also have their own income tax rates that vary from 0% to 13.3%. Some states also have local income taxes that add to the state rate.

The following states have no state income tax at all:

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

Two more states, Tennessee and New Hampshire, do not tax income from wages, but they do tax income from interest and dividends.

The following states have the lowest state income tax rates for single filers with no dependents or deductions in 2023:

  • Colorado: flat 4.4%
  • Illinois: flat 4.95%
  • Indiana: flat 3.23%
  • Michigan: flat 4.25%
  • North Dakota: 1.1% to 2.9%
  • Pennsylvania: flat 3.07%
  • Utah: flat 4.85%

Sales Taxes

Sales taxes are taxes that you pay on the goods and services that you buy. The federal government does not impose a sales tax, but most states and some local governments do. Sales tax rates vary from 0% to 10.25%, depending on the state and locality. Some states also have special sales taxes on certain items, such as gasoline, alcohol, tobacco, or hotel rooms.

The following states have no state sales tax at all:

  • Alaska
  • Delaware
  • Montana
  • New Hampshire
  • Oregon

However, some local governments in Alaska and Montana may charge their own sales taxes.

The following states have the lowest combined state and average local sales tax rates in 2023:

  • Hawaii: 4.44%
  • Wisconsin: 5.43%
  • Wyoming: 5.49%
  • Maine: 5.5%
  • Virginia: 5.63%

Property Taxes

Property taxes are taxes that you pay on the value of your real estate, such as your home or land. The federal government does not impose a property tax, but most states and local governments do. Property tax rates vary widely from 0.15% to 2.47%, depending on the state and locality. Some states also have special property taxes on certain types of property, such as vehicles, boats, or aircraft.

The following states have the lowest effective property tax rates (the amount of property tax paid per $100,000 of home value) in 2023:

  • Hawaii: $281
  • Alabama: $406
  • Colorado: $505
  • Louisiana: $551
  • South Carolina: $566

Conclusion

As you can see, there is no clear answer to the question of which state has the lowest taxes overall. It depends on many factors, such as your income level, your spending habits, your property value, and your location within the state. However, some states tend to have lower tax burdens than others across the board.

According to WalletHub the following states have the lowest tax burdens in the US:

  1. Alaska – 5.4%, 5.06%
  2. Tennessee – 6.3%, 6.22%
  3. New Hampshire – 6.4%, 6.14%
  4. Wyoming – 6.6%, 6.42%
  5. Florida – 6.7%, 6.33%

These rankings are based on a combination of income taxes (weighted at 70%), sales taxes (weighted at 30%), and property taxes (not weighted). However, these rankings may change over time as states adjust their tax policies.

If you are looking for a state with low taxes, you may want to consider one of these options or do your own research based on your specific situation and preferences.

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