Overall Tax Burden by State

Which are the highest? Find out here

Reviewed by Lea D. UraduFact checked by Vikki VelasquezReviewed by Lea D. UraduFact checked by Vikki Velasquez

One of Americans’ largest tax bills is the federal income tax calculated on Internal Revenue Service (IRS) Form 1040 in April of each calendar year. Three other major taxes come from state income, sales, and property taxes.

Tax calculations depend on an individual’s income level, marital status, and county of residence. The total tax varies from one state to another just as sales tax depends on money spent, and property tax on the value of any real estate owned.

Key Takeaways

• Aside from federal income tax, state, sales, and property taxes vary by locality.
• Sales tax depends on money spent, and property tax on the value of any real estate owned.
• Large differences in state tax burdens can impact the ability to make ends meet and save for the future.

Income Tax

A few states have zero state income tax rates or charge a flat rate without regard to earnings. In other states, the income tax rate depends on an individual’s income bracket and each state sets its brackets at different income levels. In some states, our research found that most taxpayers in the lower and middle classes pay the top rate; in others, individuals have to earn more than $1 million to pay the highest rate.

Local Taxes

Some states impose local taxes, such as city, county, school district, or municipal taxes, on top of state income taxes.

The charts below list the income tax rate in each state. An individual’s state tax bill depends on exemptions, deductions, and credits; and states differ on what tax breaks they offer and who qualifies. Here are the top marginal individual income tax rates for all 50 states and the District of Columbia as of 2024.

Sales Tax

Determining which states have the worst sales tax burden depends on which city an individual resides. Cities build their sales tax rates on top of state sales tax rates, so it’s useful to know the base rate paid when making purchases in the state.

The chart below shows all the states and the District of Columbia, their sales tax burdens, and the average local sales tax rate as of 2024.

Property Tax

Homebuyers should know what the property tax rate is in the places where they are purchasing a home. Property taxes are established at the local level, not the state level.

Sometimes just crossing the street into a different town means paying a dramatically different rate despite living in the same general area with similar amenities and quality of life.

Property tax rates are influenced by homeowners’ exemptions, when property values are reassessed, and annual caps on property tax increases, such as California’s 1% annual cap under Proposition 13.

Homeowners’ exemptions are often only available to taxpayers who meet the qualifying criteria.

Other Factors

These tables don’t account for the significant percentage of taxes that many people pay to states other than their state of residence by traveling or earning income in another location.

While individuals might pay higher taxes in one state compared with another, they may be able to earn more in the higher-taxed state. The question is whether they earn enough to make up for, or exceed, the cost of the higher tax burden.

Some may be drawn to a state with no income or sales tax, but it’s important to look at the big picture: States often compensate for lower taxes in one area with higher taxes in another.

What Low Rates Mean

Just because government officials have lots of tax dollars at their disposal doesn’t mean that they’re spending them wisely. Similarly, low tax rates don’t necessarily mean that public services are lacking. Politicians might be spending tax dollars carefully in those jurisdictions and have turned over to the private sector certain services that the government normally provides.

Which States Have the Highest and Lowest Income Taxes?

As of 2024, the states with the top marginal individual income tax rates are California (13.30%), Hawaii (11.00%), New York (10.90%), New Jersey (10.75%), and Washington D.C. (10.75%). The states with the lowest individual income tax rates are Arizona (2.50%), North Dakota (2.50%), New Hampshire (3.00%), Indiana (3.05%), and Pennsylvania (3.07%). However, Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming have no state income tax. New Hampshire only taxes interest and dividend income and Washington only taxes capital gains income.

Which States Have the Lowest and Highest Property Tax Rates?

As of 2024, Hawaii (0.27%), Alabama (0.39%), and Colorado (0.49%) are the states with the lowest effective real-estate tax rates. The states that have the highest property taxes are New Jersey (2.33%), Illinois (2.11%), and Connecticut (2.00%). How do the different rates translate into an annual property tax bill? Take a home valued at $215,000: In Hawaii, the homeowner would pay $580.50 a year in property taxes, while in New Jersey, the homeowner would pay $5,009.50.

Are There Any States That Don’t Charge Sales Taxes?

Only five states don’t have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Besides state-level sales taxes, 38 states have local sales taxes. Indeed, Alaska lets localities charge local sales taxes. The states with the lowest average combined state and local sales tax rates are Alaska (1.82%), Hawaii (4.50%), and Wyoming (5.44%). Those with the highest average combined state and local sales tax rates are Louisiana (9.56%), Tennessee (9.55%), and Arkansas (9.45%).

The Bottom Line

Many states impose similar tax burdens on their residents, but at the high and low ends, there are large differences in tax burdens that could impact an individual’s ability to make ends meet in the short run and to save for the long run.

Read the original article on Investopedia.