States with the Lowest Taxes and the Highest Taxes (2024)

"Location, location, location" is a focus that applies to more than just housing. Where you live can help or hinder your ability to make ends meet.

A myriad of taxes — such as property, license, state and local sales, inheritance, estate, and excise taxes — can eat away at your income. Often, the biggest tax ticket citizens face after paying the Internal Revenue Service is the one their state presents. As a result, identifying the states with the lowest taxes might be a smart financial move to make.

Currently, 43 states and the District of Columbia levy individual income taxes. Weighing the tax landscape against your financial picture could help you stretch your dollars further.

10 states with the highest personal income tax rates

A comparison of 2023 tax rates compiled by the Tax Foundation ranks California as the top taxer with a marginal tax rate (the maximum statutory tax rate) of 13.3% rate. This includes a 1% mental health services tax on personal income over $1 million.

The top 10 highest income tax states (or legal jurisdictions) for 2023 are:

1. California 13.3%
2. Hawaii 11%
3. New York 10.9%
4. New Jersey 10.75%
5. District of Columbia 10.75%
6. Oregon 9.9%
7. Minnesota 9.85%
8. Massachusetts 9%
9. Vermont 8.75%
10. Wisconsin 7.65%

Each of these states has a personal income tax floor, deductions, exemptions, credits, and varying definitions of taxable income that determine what a citizen actually pays.

10 states with the lowest personal income tax rates

Seven states have no personal income tax:

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

New Hampshire doesn’t tax income from wages, but it taxes dividends and interest income at the rate of 4%. Washington also does not tax wage income, but it taxes capital gains at the rate of 7%.

Among the states that tax income, North Dakota’s 2.9% marginal tax rate is the lowest in the nation, making the Peace Garden State the 10th lowest income taxed state for 2023.

Low personal income tax rates can be misleading; a lack of available tax deductions, for example, can raise the effective rate you pay. The Retirement Living Information Center states that figuring your total tax burden, including sales and property taxes, can give you a more accurate reading on affordability, especially if you're on a fixed income. However, these states with the lowest taxes on income can be a good place to start looking for a more affordable location.

TurboTax Tip:

Personal income tax rates do not tell the whole state tax story. The states vary in their personal income tax floors, deductions, exemptions, credits, and definitions of taxable income. Sales and property taxes also affect a state’s affordability.

States with the highest and lowest property taxes

Property tax typically falls under local, not state, jurisdiction. An analysis performed by the Tax Foundation from the Census Bureau's 2021 American Community Survey found 11 counties with median property tax payments exceeding $10,000. Six of these counties are in New Jersey, four are in New York, and one is in Virginia. Looking at the 2021 property taxes paid as a percentage of owner-occupied housing value, the Tax Foundation finds that these states have the highest effective property tax rates:

• New Jersey 2.23%
• Illinois 2.08%
• New Hampshire 1.93%
• Vermont 1.83%
• Connecticut 1.79%
• Texas 1.68%
• Nebraska 1.63%
• Wisconsin 1.61%
• Ohio 1.59%
• Iowa 1.52%

The states with the lowest effective property tax rates are:

• Hawaii 0.32%
• Alabama 0.40%
• Colorado 0.55%
• Louisiana 0.56%
• Wyoming 0.56%
• Utah 0.57%
• West Virginia 0.57%
• South Carolina 0.57%
• Nevada 0.59%
• Delaware 0.61%

Sales tax takers and leavers

States that don’t tax income typically rely on sales tax to fund their government operations. For example, Tennessee, one of the seven states with no personal income tax, has the nation’s second-highest state sales tax rate–7%. In addition, Tennessee, like many other states, allows its municipalities to charge a local sales tax. When Tennessee’s state sales tax is combined with its average local sales tax, the Volunteer State has the highest combined sales tax in the nation.

Factoring the combination of state sales tax and average local sales tax, the top five highest total sales tax states as ranked by the Tax Foundation for 2023 are:

• Tennessee 9.548%
• Louisiana 9.547%
• Arkansas 9.443%
• Washington 9.397%
• Alabama 9.237%

Residents of these states pay the least in sales taxes overall:

• Delaware 0%
• Montana 0%
• New Hampshire 0%
• Oregon 0%
• Alaska 1.813%

Tax burden leaders

With each state taking a different approach to raising revenue, the question becomes: how do the states rank when combining all the various taxes? WalletHub calculates the proportion of total personal income that residents pay toward state and local taxes. This is called the tax burden. It includes individual income taxes, property taxes, and sales and excise taxes.

According to the organization, the top ten states with the highest overall tax burden are:

• New York – 12.47%
• Hawaii – 12.31%
• Maine – 11.14%
• Vermont – 10.28%
• Connecticut – 9.83%
• New Jersey – 9.76%
• Maryland – 9.44%
• Minnesota - 9.41%
• Illinois – 9.38%
• Iowa – 9.15%

The states with the lowest tax burden are:

• Alaska – 5.06%
• Delaware – 6.12%
• New Hampshire – 6.14%
• Tennessee – 6.22%
• Florida – 6.33%
• Wyoming – 6.42%
• South Dakota – 6.69%
• Montana – 6.93%
• Missouri – 7.11%
• Oklahoma – 7.12%

Although taxes may not be the first thing you consider when deciding where to live, knowing the tax situations of the locations you're considering for a move could help you save in the long-run, especially when retiring.