Best States for Low Taxes: 50 States Ranked for Taxes, 2019

It doesn’t take much income to find yourself in Alabama’s highest tax bracket, though the Yellowhammer State does allow you to deduct your federal income taxes (it’s one of just a handful of states with this break). Some counties and cities charge an “municipal occupational tax” of 0.5%-2% on income; the average levy across the state is 0.5%, according to the Tax Foundation.

Property taxes are the second-lowest in the country, but sales taxes take a bite — and the full rate is levied on food.

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Alaska gives each legal resident who has lived in the state for a full year an annual “Permanent Fund Dividend.” But the dividend has been shrinking in recent years, reflecting lower oil prices and a drop in production. For 2019, each legal resident will receive $1,606, down from a peak of $2,072 in 2015.

Gas taxes in the Last Frontier are the lowest in the U.S., and Alaskans pay no state income taxes or state sales taxes. While municipalities – generally those without real estate taxes – impose local sales taxes as high as 7.5%, the average sales tax is 1.76%, according to the Tax Foundation. Anchorage, Alaska’s largest city, has no sales tax.

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Arizona’s top income tax rate of 4.54% doesn’t kick in until taxable income exceeds $158,996 for single filers or $317,990 for married couples filing jointly.

Residents pay an average of $754 in taxes per $100,000 of assessed home value, low for the U.S. And at 19 cents per gallon, state gas taxes are well below the national average of 34 cents per gallon.

Like most states, the Grand Canyon State excludes prescription drugs and food for home consumption from state sales taxes. However, all 15 counties levy additional taxes, as do many municipalities, and some jurisdictions extend their taxes to groceries.

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Property taxes are low in the Natural State, but sales taxes are among the highest in the country — even groceries are taxed (albeit at a lower rate). Income tax is particularly complicated in Arkansas, as the state uses multiple rate schedules that give it 16 different tax brackets in practice. Notably, service pay for active-duty members of the armed forces is completely exempt from income tax.

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While some California residents will see their income taxed at the country’s highest rate, 13.3%, which hits taxable income over $1 million for singles and $1,145,960 for married joint filers, for more modest incomes, the tax bite is far less harsh

The Golden State has the highest statewide sales tax, at 7.25%, but on average, municipalities don't add all that much, with the average state and local combined rate at 8.66%, according to the Tax Foundation. In Los Angeles County, though, dozens of cities have double-digit sales taxes.

Californians have lower property-tax rates than residents of other coastal states. However, in a state with some of the highest real estate prices in the U.S., bills can still be pricey. In the Bay Area and other parts of the state where an average home costs upwards of $1 million, the federal $10,000 cap on state and local tax deductions will increase the overall impact of property taxes.

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The Centennial State has a flat tax: If you have federal taxable income, the rate is 4.63%. Property taxes are quite low, but sales taxes take a bite. Colorado has a legal cannabis market; the taxes on marijuana include a 15% excise tax, a 15% "retail marijuana sales tax," plus regular state and local sales taxes.

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About the only bright spot in Connecticut’s tax picture is that localities can’t add to The Constitution State’s 6.35% sales tax. Real estate taxes are the fourth-highest in the country and the state has not only a gift tax, but a luxury tax. Plus, annual car taxes are steep.

The Nutmeg State is one of Kiplinger’s top ten least tax-friendly states. The $10,000 cap on the federal tax deduction for state and local taxes hits residents in high-income areas, such as Fairfield County, who pay more than $10,000 in property taxes — their federal tax deductions for state and local taxes will be curtailed.

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The First State is a standout among its East Coast neighbors, with zero sales tax and and low property taxes. Income taxes escalate quickly, though, with the top rate of 6.6% hitting taxable income over $60,000 (for both single and joint filers), and the city of Wilmington imposing its own wage tax of 1%. Delaware is one of Kiplinger’s top ten most tax-friendly states.

Little Delaware pulls off this low-tax trick by being a very friendly place for businesses to incorporate, and then collecting fees and taxes from these absentee businesses, whose real operations are elsewhere.

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Living in the Nation’s Capital can be expensive. Though property and sales taxes are unexceptional, the District of Columbia takes huge bite of income. Taxable income over $40,000 gets hit at a 6.5% rate (the top rate of 8.95% is reserved for taxable income over $1,000,000).

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The Sunshine State is well known for its absence of a state income tax, and its property taxes are below the midpoint for the U.S. Florida is one of Kiplinger’s top ten most tax-friendly states

Notably, Florida is one of only two states to exempt cigars from all taxation, a reflection of its long history as a cigar-manufacturing location.

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Georgia’s tax brackets mean that many taxpayers will find themselves paying the top marginal rate, which kicks in at just $10,000 of taxable income for married couples filing jointly or $7,000 for individual filers. However, the rates are dropping. For 2019, the rate is 5.75%. A further reduction to 5.5% would require a joint resolution by Georgia lawmakers and the governor during the 2020 legislative session.

The Peach State’s sales taxes lean high, and in some areas, groceries are taxed as well. Property taxes are modest.

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The Aloha State is known for its high cost of living. Some of that comes from taxes: the top tax bracket is an eye-popping 11% (applied to taxable income over $400,000). Also, don’t be fooled by Hawaii’s 4.35% average sales tax rate. Since it’s due on virtually all transactions, the pocketbook effect is severe.

A ray of sunshine: Property tax rates are the lowest in the U.S.

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Idaho took steps to head off an effective state tax increase from the new federal tax law. Among the steps: Increasing the state standard deduction, introducing a a new $130 per child tax credit, and lowering tax rates a hair. Even so, Idaho’s top tax rate of 6.925% kicks in at a fairly low bracket ($22,558 for married joint filers), making its income-tax hit feel more like that of a a coastal state.

On the other hand, property taxes are low, sales tax modest and the Gem State does not have an inheritance tax or estate tax.

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Illinois’ economic woes are one reason why the Prairie State tops our list of the least tax-friendly states in the country. The state ranks #50 in the latest ranking of states’ fiscal health by the Mercatus Center at George Mason University, and residents are paying the price with higher taxes.

The state's 4.95% flat income tax rate actually isn't that high when compared to other states, but other taxes are a doozy. For example, property taxes in Illinois are the second-highest in the nation. On a $400,000 home in the state, the average annual property tax bill would be an eye-popping $9,634.

Sales taxes are high, too. In some municipalities, combined state and local sales taxes exceed 10%. Most states exempt food and drugs from their sales tax, but that's not the case in Illinois.

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The Hoosier State dropped its flat income tax a smidge in 2017, from 3.3% to 3.23%, but many counties in Indiana also impose their own income taxes, with an average levy of 1.56%, according to the Tax Foundation. The state sales tax is high, though municipalities don’t get to add to it.

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Which do you think is higher in Iowa: the corn or taxes? It might be taxes, thanks to above average income and property taxes in the state. One reason why income taxes are on the high end in the state is because over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax. The average property tax rate in the Hawkeye State is the 12th-highest in the nation. For a $400,000 home in the state, the owners can expect to pay about $6,711 per year in property taxes. That certainly doesn’t help homeowners in Iowa.

Income tax rates have been lowered for 2019, and will go down further in 2023, assuming state revenues hold up.

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Kansas has seen a lot of tax drama in the past decade as it implemented, then ultimately rejected, a series of tax cuts promoted by then-Governor Sam Brownback. Individual income tax rates went up in 2017, as well as business taxes. Residents who earn interest and dividends may see those taxed by school districts.

Sales taxes are the 9th highest in the country. (and are applied to groceries as well).

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Kentucky changed its tax structure substantially in 2018, moving to a 5% flat tax (to which localities can add, an average of 2.08%, according to the Tax Foundation). Deductions for health insurance premiums, long-term care insurance coverage, and medical expenses were eliminated. More items are now subject to the state’s 6% sales tax, too, including club fees, pet care services, and landscaping services.

However, the Bluegrass State still prevents localities from adding to that sales tax, and the property tax burden is light.

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The Pelican State is homeowner-friendly, with property taxes among the lowest in the country, helping make it one of Kiplinger’s top ten most tax-friendly states. The average tax bill is under $1,000, in fact. But, sales taxes are high — among the highest in the country, in fact, and the local portion of these is due on groceries and prescription drugs.

Louisiana is one of a handful of states that allow residents to deduct their federal income taxes.

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Maine’s lowest income tax rate of 5.8% (on taxable income less than $21,450 for single filers) is higher than some other states’ maximum rate. The state tries to make up for that by charging a relatively low sales tax (and not letting municipalities add to it).

Though Maine does have an estate tax, its exclusion amount is quite high: $5.7 million for 2019.

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The Old Line State takes aim at income: Maryland’s 23 counties and Baltimore City have income taxes ranging from 1.75% to 3.20% of taxable income — on top of the state’s take. Maryland’s real estate taxes are middle-of-the-road and sales tax a low 6% state levy.

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The Bay State gets dubbed “Taxachusetts” sometimes, but that's not entirely fair, especially when you stack it up against its New England neighbors (well, except New Hampshire). Taxes in Massachusetts are decidedly average, with a flat 5.1% income tax and a flat 6.25% sales tax (municipalities can’t add to it). Property taxes lean a bit high. The state is one of the few to still have an estate tax, and the exemption threshold ($1 million) is low.

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Michigan is one of just a handful of U.S. states with a flat tax — the rate is a modest 4.25%. But cities can levy income taxes as well; in Detroit, the rate is 2.4%. Non-residents also pay, at half the rate. Property taxes are steep.

Minnesota hits hard with income tax. It added a new top income tax rate of 9.85% in 2013. But what makes the North Star State really stand out is that its lowest income tax rate is 5.35%.

Property taxes are on the high side, too. And the state’s estate tax has an unusual look-back provision to go after people who try to give away their money. The North Star State’s estate tax exemption for 2019 is $2.7 million. It will rise to $3 million in 2020; tax rates are from 13% - 16%. But Minnesota will include as part of your estate any taxable gifts made within three years prior to death.

The Magnolia State is home to some of the cheapest property taxes in the nation. Its income tax levy, already fairly low, is being lightened. For 2018, the first $1,000 is exempt from the state's lowest 3% bracket. For 2019, the first $2,000 of taxable income is exempt. By 2022, the first $5,000 of taxable income will be exempt.

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Missouri took steps in 2018 to reduce its income tax bite, which has historically been a big one, with most taxpayers hit by its top marginal rate (5.9% for 2018). That rate dropped to 5.4% in 2019, and could go as low as 5.1% in future years if the state meets revenue targets. However, at the same time, lawmakers decided to partially phase out Missouri taxpayers’ ability to deduct a portion of their federal tax liability from their state taxes. Income limits now apply.

Missouri’s sales tax are high, but its fuel tax notably low. Kansas City and St. Louis have an earnings tax of 1 percent.

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The Treasure State is one of five states that do not impose a general sales tax (though you’ll find one in some resort areas). That, along with relatively low property taxes, is the good news. The bad news is that the top income rate of 6.9% kicks in at just $17,900 of taxable income. Montana is one of a handful of states that allows residents to deduct some of their federal income taxes from their state return.

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The Cornhusker State has been making efforts to reduce its income tax bite, including, in 2018, creating a personal exemption credit so that the new federal tax law wouldn’t raise individuals’ state taxes. But property taxes are among the highest in the country.

Nebraska’s inheritance tax is a local tax administered by counties and ranges from 1% to 18%; assets passing to a spouse or charity are exempt from inheritance taxes.

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A no-income-tax haven, Nevada is one of Kiplinger’s top ten most tax-friendly states. Where does the Silver State get its money? Besides the gaming industry, much of it comes from sales tax: the average combined state and local tax rate is 8.15%, the 13th-highest in the nation.

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Like Tennessee, New Hampshire has a very limited income tax that only applies to dividend and interest income. There’s no sales tax in the Granite State, either. New Hampshire residents also don’t pay too much state tax at the pump. At only 23.83 cents per gallon, the state’s gasoline tax is well below the national average. The money’s got to come from somewhere, though: Local governments in New Hampshire dig deep into your pocket for property taxes.

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Income tax rates for Garden State residents are relatively low compared with some other tax-unfriendly states. They checked in as the third-lowest in our survey for states with a broad-based income tax. (There’s also a payroll tax in Newark.) But while New Jersey gives residents a break on income taxes, it brings the hammer down when they buy a home. New Jersey’s property taxes are the highest in the U.S. The state-wide average property tax on a $400,000 home in New Jersey comes to a whopping $10,120. New Jersey is one of Kiplinger’s top ten least tax-friendly states.

Fuel taxes, once a bright spot for residents and turnpike travelers alike, are now near the top for the country.

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Personal income tax rates top out at 4.9% on taxable income over $16,000 for single filers and over $24,000 for married couples filing jointly. And, hang in there until you’re 100 and your income taxes are waived altogether.

Property taxes are modest, but sales taxes lean high and hit more transactions than most states.

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The Empire State has a hefty income tax bite. Plus, New York City and Yonkers impose their own income taxes, and there’s a commuter tax for self-employed people working in and around New York City.

New York’s average sales tax rate is the 10th-highest in the country. However, food and drugs are exempt from taxes, as are health club memberships, less-expensive clothing and footwear, most arts and entertainment tickets, and a host of other items. The average property tax on a $400,000 home in New York is about $7,246, which is the fourth-highest average in the country. But in some high-cost parts of the state, such as Westchester County, homeowners pay more than twice that amount, which means they’re pinched even more by the $10,000 cap on the federal deduction for state and local taxes.

Those combine to make the Empire State one of Kiplinger’s top ten least tax-friendly states.

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The Tar Heel State has been shaking up its tax structure, switching out graduated income tax brackets for a flat tax and capturing more services with its sales tax. The tax rate for 2018 ws 5.49%; in 2019 it dropped to 5.25%.

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