Do you live somewhere ‘tax friendly’? Map shows every state’s grade (2024)

FAQs

What is the most tax friendly state to live in? ›

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.) Nevada is the most tax-friendly state, where residents pay $2,949. Illinois is the least tax-friendly state; there, families pay $12,472 in annual taxes.

Some states will have you report your income from all sources, just like a full-year resident does. Then, after you calculate the tax, this amount will be reduced based on the income you made as a resident. Other states will have you split the income between states before calculating the tax.

Local taxes fund government services including police and fire services, education and health services, libraries, road maintenance, and other programs and projects which benefit the community at large. Many of these services also receive federal funds in the form of grants.

Unsurprisingly, the states with no state income taxes at all ended up scoring pretty highly. Those eight states are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

As of 2023, nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — do not levy a state income tax.

What State Has the Highest Income Tax? California has the highest state income tax, with a rate of up to 13.3%. California has graduated-rate income taxes that range from 1% to a 13.3% tax rate on income of more than $1 million. Middle-class Californians pay an income tax rate in the range of 6% to 9.3%.

Who Does Not Have to Pay Taxes? Generally, you don't have to pay taxes if your income is less than the standard deduction, you have a certain number of dependents, working abroad and are below the required thresholds, or are a qualifying non-profit organization.

If you file your taxes and don't include your new address, you can notify the IRS of your address change by filling out Form 8822.

Can you be a resident of two states? ›

You can be a resident of two states at the same time, usually by maintaining a domicile in one state and spending 183 days or more in another. It is not advisable, as you will be liable to file income taxes in both states, rather than in only one.

Federal law dictates that two states are not allowed to tax the same income. If the states do not have reciprocity, then you'll typically get a credit for some or all of the taxes withheld by your work state.

Local income tax is usually based on where a taxpayer lives, but in some cases, taxpayers also owe local income tax based on where they perform work (for example, if they commute). You may have withholding obligations based on where your company does business or based on where your employees perform work.

1. Bridgeport, Connecticut. As one of the wealthiest cities in America, Bridgeport carries the highest overall tax rate in the nation. Wealthy taxpayers earning over $150,000 per year are on the hook for up to 22% in state and local taxes.

Taxes also fund programs and services that benefit only certain citizens, such as health, welfare, and social services; job training; schools; and parks.

Alaska is renowned for having the lowest tax burden among all states. With no state income tax or state sales tax, Alaskans enjoy the advantage of keeping more of their earnings.

Mississippi. Mississippi has the lowest cost of living in the United States. With a cost of living index of 83.3, expenses are nearly 17% less than the national average. Mississippi's housing costs are the lowest in the nation.

Idaho is revered as one of the best states to retire on social security for taxes. In this state, social security benefits are not taxed at the state level. Other types of retirement income are taxed at rates ranging from 0.00% to 6.00%. Property and sales tax rates are also low.