Get updates delivered to you daily. Free and customizable.
FinanceBuzz
10 States Where Tax Burdens Are the Highest and The Lowest
By Jenny Cohen,
4 days ago
Tax season has arrived, and both individual taxpayers and couples filing jointly are pulling together all the documents they need to prepare their returns.
But how much will you end up paying in state and federal taxes? Whether you can keep more cash in your wallet depends partially on where you live and how you are filing.
Recently, FinanceBuzz analyzed data from the U.S. Census Bureau and combined it with federal and state tax rates to calculate the tax burden residents face in each state as a percentage of median annual income.
Here are the states with the highest and lowest rates for individual taxpayers, followed by the rankings for couples filing jointly.
If you hope to retire early , Massachusetts won’t make it easy on your efforts to build a nest egg. The Bay State leads all U.S. states with the highest tax burden for individual taxpayers.
According to the Pew Charitable Trusts, the state relies heavily on state income tax, with 56.1% of its revenue in fiscal year 2022 coming from the tax. That puts it behind only Oregon and New York.
In addition to high taxes, Hawaii also has the highest cost of living among U.S. states, according to the Missouri Economic Research and Information Center.
The state’s remote location and reliance on imported goods pushes costs higher for residents.
5. Maryland: 22.58%
Those filing as individuals in Maryland face a high tax burden. However, there is a silver lining for some retirees worried about taxes.
The state doesn’t tax Social Security income and only partially taxes retirement fund withdrawals and public pension income. On the other hand, private pension income is fully taxed.
States with the lowest tax burdens
While tax burdens are sky-high in some states, others give taxpayers a big break. Here are the places where individual taxpayers pay the least in taxes.
Florida has the lowest tax burden for individual filers among all the states. In fact, it's one of nine states that has no tax on income whatsoever.
However, not every tax in Florida is low. Florida’s property tax burden is higher than that of states such as Maryland and Hawaii, according to Wallethub. Those two states have much higher taxes on income.
2. Tennessee: 15.77%
Tennessee also has no state income tax. However, watch out for the state’s sales taxes. General sales taxes in the Volunteer State account for 56.9% of the state’s revenue.
3. Nevada: 15.78%
Nevada has no state income tax and looks to other sources for its revenue. For example, the state relies on taxes from gambling and a high sales tax for revenue.
Living in a place with low taxes is a key advantage if you want to build wealth . So, it’s important to consider tax rates when deciding where to settle down.
You can save money living in a state with low income taxes, but you will also want to factor in sales or other types of taxes.
Also, remember that tax laws can vary from state to state in terms of how much retirement income — including income from 401(k) plans and IRAs, Social Security, and pensions — is subject to taxes.
Get updates delivered to you daily. Free and customizable.
Welcome to NewsBreak, an open platform where diverse perspectives converge. Most of our content comes from established publications and journalists, as well as from our extensive network of tens of thousands of creators who contribute to our platform. We empower individuals to share insightful viewpoints through short posts and comments. It’s essential to note our commitment to transparency: our Terms of Use acknowledge that our services may not always be error-free, and our Community Standards emphasize our discretion in enforcing policies. We strive to foster a dynamic environment for free expression and robust discourse through safety guardrails of human and AI moderation. Join us in shaping the news narrative together.
Comments / 0