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All Contents © 2019The Kiplinger Washington Editors
By Rocky Mengle, Tax Editor
David Muhlbaum, Senior Online Editor
| October 1, 2019
This year's tax filing season was more nerve racking than most. It was the first time we had to deal with all the federal tax code changes made by the 2017 tax reform law. U.S. tax rates were lowered, standard deductions were doubled, itemized deductions were limited, and personal exemptions were repealed. Most people had no idea if they would get a refund or owe taxes until they completed their 1040.
And the federal tax craziness trickled down to our state income tax returns, too. That's because most states have you "piggyback" off your federal return and start with either federal adjusted gross income or taxable income to compute your state tax liability. States also have their own rates, and state standard deductions and personal exemptions aren't necessarily the same as their federal counterparts. All this means that your state tax bill could have gone up or down by hundreds or even thousands of dollars depending on how much your state did or didn't do in response to the federal tax law changes.
The shakeup also makes it harder to tell how your state taxes line up with those of a similarly situated person in a neighboring state. Maybe your state taxes went up, while his or hers went down. To help make that comparison, we estimated the tax burden in each state for a hypothetical married couple with a combined earned income of $150,000, $10,000 in dividend income, two dependents and a $400,000 home (with a mortgage). Based on our findings, we revised our annual State-by-State Guide to Taxes so that you can see how your state stacks up against the others. This is particularly useful if you're planning to move to a different state.
We also updated our list of the 10 least tax-friendly states in the U.S. for 2019 (starting with the least-friendly state). Take a look below to see if your state is on the list. We hope it isn't…but if it is, maybe it's time to think about relocating.
See the final slide for a complete description of our ranking methodology and sources of information.
Roman Boed via Flickr/Creative Commons
State Income Tax: 4.95% (flat)
Effective Income Tax Rate: 4.95% for single filers; 4.63% for joint filers
Average State and Local Sales Tax: 8.78%
Average Property Tax: $2,408 per $100,000 in home value
Gas Taxes and Fees: 54.98 cents per gallon
Go to Illinois' Full State Profile
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 it goes downhill fast for Illinois residents when you look at all the other taxes they have to pay. For example, property taxes in Illinois are the second-highest in the nation. If our hypothetical couple purchased a $400,000 home in the state, their average annual property tax bill would be an eye-popping $9,634.
Sales taxes are high, too. The average combined state and local sales tax in Illinois is 8.78%, the seventh-highest rate in the U.S. 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. The state sales tax rate for qualifying food and drugs is 1%, but it can go higher when you tack on local taxes.
And the bad news doesn't stop there. Illinois has the highest average state and local tax on wireless cellphone service (20.91%), according to the Tax Foundation. Gas taxes are the third-highest in the nation. And Illinois is one the few states that still has an estate tax (it applies to estates over $4 million).
National Park Service
State Income Tax: 3% (on taxable income of $10,000 or less for single filers; $20,000 or less for joint filers) — 6.99% (on taxable income over $500,000 for single filers; over $1 million for joint filers)
Effective Income Tax Rate: 2.03% for single filers; 5.19% for joint filers
Average State and Local Sales Tax: 6.35%
Average Property Tax: $2,114 per $100,000 in home value
Gas Taxes and Fees: 42.11 cents per gallon
Go to Connecticut's Full State Profile
The Constitution State is an expensive place to live. Connecticut's property taxes are the fourth-highest in the U.S., so the $10,000 cap on the federal tax deduction for state and local taxes stings a bit more here. The state-wide average property tax for a $400,000 home is $8,456 per year. However, residents in high-income areas such as Fairfield County typically pay more than $10,000 in property taxes each year, so their federal tax deductions for state and local taxes have been curtailed.
The state income tax for our make-believe couple was the ninth-highest amount. Connecticut also has the ninth-highest state and local gas taxes in the U.S. at 42.11 cents a gallon.
Connecticut also taxes estates worth more than $3.6 million for anyone who dies in 2019 (the threshold is adjusted annually for inflation).
On the plus side, there are no local sales taxes in Connecticut, so you'll pay only the statewide rate of 6.35% (slightly below average) on most of your purchases. Groceries and medicine aren't taxed, but just about everything else is, including a broad range of services. Luxury items, such as cars valued at $50,000 or more or jewelry worth more than $5,000, are taxed at 7.75%, which means a $6,000 engagement ring would cost you $6,465 including tax.
State Income Tax: 4% (on taxable income of $8,500 or less for single filers; $17,150 or less for joint filers) — 8.82% (on taxable income over $1,077,550 for single filers; over $2,155,350 for joint filers)
Effective Income Tax Rate: 5.03% for single filers; 6.33% for joint filers
Average State and Local Sales Tax: 8.49%
Average Property Tax: $1,812 per $100,000 in home value
Gas Taxes and Fees: 45.96 cents per gallon
Go to New York's Full State Profile
The Empire State has a hefty income tax bite—it would impose the eighth-highest tax in the nation on our hypothetical couple. 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 ninth-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.
New York also has an estate tax—with an unusual "cliff tax" kicker. Generally, the tax is only imposed on that portion of an estate over the $5.74 million (for 2019) exemption. However, if the value of the estate is more than 105% of the exemption amount, the exemption won't be available and the entire estate will be subject to New York estate tax.
The state's cellphone wireless service tax is the fifth-highest in the country. State gasoline taxes are considerably higher than the national average of 31.7 cents per gallon, too.
State Income Tax: 3.86% (on taxable income of $11,450 or less for single filers; $15,270 or less for joint filers) — 7.65% (on taxable income over $252,150 for single filers; over $336,200 for joint filers)
Effective Income Tax Rate: 2.59% for single filers; 4.95% for joint filers
Average State and Local Sales Tax: 5.44%
Average Property Tax: $1,924 per $100,000 in home value
Gas Taxes and Fees: 32.9 cents per gallon
Go to Wisconsin's Full State Profile
The Badger State earns its spot on our list of the least tax-friendly states with high income and property taxes. Despite lowering the income tax rate for some people with lower incomes, Wisconsin had the 14th-highest income tax in the country on the returns we prepared for our imaginary couple. And we estimate that property taxes for a $400,000 home in the state would run about $7,695 per year, which is the sixth-highest amount in our nation-wide rankings.
Sales taxes are actually low in Wisconsin. It has the fourth-lowest combined average state and local tax rate in the nation, says the Tax Foundation. And there is no estate tax, either.
Wisconsin's beer tax is tied for the second-lowest in the country. So at least Cheeseheads can have a cold one with their brat without having to pay too much tax.
State Income Tax: 1.4% (on taxable income of $20,000 or less) — 10.75% (on taxable income over $5 million)
Effective Income Tax Rate: 1.53% for single filers; 3.37% for joint filers
Average State and Local Sales Tax: 6.6%
Average Property Tax: $2,530 per $100,000 in home value
Gas Taxes and Fees: 41.4 cents per gallon
Go to New Jersey's Full State Profile
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. Since that amount exceeds the $10,000 cap on the federal deduction for state and local taxes, our hypothetical couple would also take a hit on their federal income tax return if they moved to New Jersey and itemized.
Sales taxes are below average in New Jersey. The state sales tax rate is 6.625%, but because some areas charge only half the state rate on certain sales, New Jersey's average state and local combined sales tax rate is only 6.6%.
As any East Coast traveler can tell you, New Jersey is no longer a place where you can hop off an exit and buy cheap gas. At 41.4 cents per gallon, the state's gas tax is now the 11th-highest in the country.
State Income Tax: 2.46% (on taxable income of $3,230 or less for single filers; $6,440 or less for joint filers) — 6.84% (on taxable income over $31,160 for single filers; over $62,320 for joint filers)
Effective Income Tax Rate: 3.23% for single filers; 5.22% for joint filers
Average State and Local Sales Tax: 6.88%
Average Property Tax: $1,855 per $100,000 in home value
Gas Taxes and Fees: 30.6 cents per gallon
Go to Nebraska's Full State Profile
While the cost of housing is comparatively low in the Cornhusker State, the average property tax rate in the state is quite high. For a $400,000 home, the state-wide average tax in Nebraska comes to $7,421 per year. That's the eighth-highest property tax amount in our U.S. rankings, and it's the primary reason why Nebraska is on the least tax-friendly list.
Nebraska's income and sales taxes for our fictional couple are middle-of-the-road, which isn't enough to counter the state's high property tax rate. Gas taxes are "average," too.
The state also taxes inherited property at rates ranging from 1% to 18% (property passing to a spouse or charity are exempt). In addition, Nebraska has the fourth-highest wireless service tax in the nation with a combined state and local rate of 18.84%.
State Income Tax: 3.07% (flat)
Effective Income Tax Rate: 5.07% for both single and joint filers
Average State and Local Sales Tax: 6.34%
Average Property Tax: $1,674 per $100,000 in home value
Gas Taxes and Fees: 58.7 cents per gallon
Go to Pennsylvania's Full State Profile
With a 3.07% flat income tax rate, the Keystone State looks like it could be a low-tax state at first glance. However, most cities and towns in Pennsylvania tack on their own local income tax (school districts, too). Philadelphia hits taxpayers the hardest with a 3.8712% tax on residents and a 3.4481% tax on nonresidents (3.8809% and 3.4567%, respectively, before July 2019).
Property taxes are above average in Pennsylvania, too. If our made-up couple moved into a $400,000 home in the state, they'd pay an estimated $6,698 in tax each year if the state's average property tax rate was applied.
Pennsylvania also has the second-highest state gas tax in the nation at 58.7 cents per gallon, and the sixth-highest state and local cellphone wireless service taxes (16.27% combined).
An inheritance tax adds to the state's overall tax burden. The tax rates range from 4.5% to 15% depending on the relationship of the heir to the deceased person. Property inherited by a surviving spouse, or by a child of the decedent who is age 21 or younger, isn't taxed.
State Income Tax: 0% (on taxable income of $21,750 or less) — 4.797% (on taxable income over $217,400)
Effective Income Tax Rate: 1.81% for single filers; 4.83% for joint filers
Average State and Local Sales Tax: 7.17%
Average Property Tax: $1,641 per $100,000 in home value
Gas Taxes and Fees: 38.51 cents per gallon
Go to Ohio's Full State Profile
The tax situation is Ohio is deceiving. While none of the major state and local taxes in the Buckeye State are sky high, they're all above average. So when all the taxes are added up, our hypothetical couple is stuck with a pretty significant state and local tax burden.
Ohio's income tax is like Pennsylvania's—the state rates themselves aren't particularly scary, but the overall rate ends up being higher-than-average when you add in local taxes. Most cities and towns in Ohio impose their own income tax, and their tax rates are as high as 3%. As a result, the combined state and local income tax burden in the state is above the national average.
Housing costs in Ohio are relatively low, but the state's average property tax bill isn't. For a $400,000 home in the state, the owner can expect to pay about $6,564 each year in property taxes. That's above the U.S. average for a home at that price.
According to the Tax Foundation, the average combined state and local sales tax in Ohio is 7.17%. You guessed it…that's above the national average. Gas taxes in the state are the 12th-highest nationally, too.
State Income Tax: 0.33% (on taxable income of $1,638 or less) — 8.53% (on taxable income over $73,710)
Effective Income Tax Rate: 4.43% for single filers; 7.03% for joint filers
Average State and Local Sales Tax: 6.82%
Average Property Tax: $1,678 per $100,000 in home value
Gas Taxes and Fees: 30.5 cents per gallon
Go to Iowa's Full State Profile
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.
Iowa's combined average state and local sales tax rate—6.82%, according to the Tax Foundation—and the state gasoline tax rate—30.5 cents per gallon—are in the middle-of-the-pack when compared to the rates in other states.
Iowa also has an inheritance tax on estates worth at least $25,000. The tax rates run from 5% to 15%, and surviving spouses and other close relatives of the decedent are exempt.
State Income Tax: 3.1% (on taxable income of $15,000 or less for single filers; $30,000 or less for joint filers) — 5.7% (on taxable income over $30,000 for single filers; over $60,000 for joint filers)
Effective Income Tax Rate: 4.04% for single filers; 5.04% for joint filers
Average State and Local Sales Tax: 8.67%
Average Property Tax: $1,491 per $100,000 in home value
Gas Taxes and Fees: 24.03 cents per gallon
Go to Kansas' Full State Profile
Most people don't think of the farm belt as a high-tax area, but here's another state from that region on our least tax-friendly list. With Kansas, its sales tax is the main culprit behind its poor (from a taxpayer standpoint) showing. According to the Tax Foundation, the combined average state and local sales tax rate is 8.67%. That's the 9th-highest rate in the country.
Income taxes are above average in the Jayhawk State, but not by very much. Almost 500 school districts in Kansas also imposed a local tax on interest and dividends. The local rates range from 0.125% to 2.50%. Even though the local taxes aren't on all income, they certainly push up the overall tax burden for many people in the state.
If our hypothetical couple moved to Kansas and bought a $400,000 home in the state, they would pay about $5,963 in property taxes each year based on the state's average tax rate. That's the 15th-highest amount in the country for a home at that value.
There is some good news for Kansans. State gas taxes (24.03 cents per gallon) and beer taxes (18 cents per gallon) are below the national averages. Plus, there's no estate or inheritance tax in the state.
Our maps and other tax content include data and state tax-policy details from a wide range of sources. To create our rankings, we created a metric to compare the tax burden in all 50 states and the District of Columbia.
We looked at each state's tax agency, plus this helpful document from the Tax Foundation. Effective tax rates represent the ratio of income tax due to state taxable income for our sample filers. See more about that calculation below under "Rankings."
Values for median property tax paid and assessed home value in each state come from the U.S. Census American Community Survey and are 2017 data, the most recent available. We created a ratio of these: average taxes paid per $100,000 of home value.
Each state's tax agency. We also cite the Tax Foundation's figure for average sales tax, which is a population-weighted average of local sales taxes. In states that let local governments add sales taxes, this gives an estimate of what most people in a given state actually pay, as those rates can vary widely.
The American Petroleum Institute prepares a quarterly update of state rates. We used July 2019 data but made several updates to reflect new rates in Arkansas and Alabama. Values include excise taxes, sales taxes (when applicable) and a variety of fees that states impose.
Each state's tax agency.
The Tax Foundation.
The "tax-friendliness" of a state depends on the sum of income, sales and property tax paid by our sample filers.
To determine income tax, we prepared returns for a married couple with two dependent children, an earned income of $150,000, and qualified dividends of $10,000. They paid $10,000 in mortgage interest. Since some states have local income taxes, we domiciled our filers in each state's capital, from Juneau to Cheyenne. We calculated these 2018 returns using software from Credit Karma.
How much the sample filers paid (and deducted on their income tax return) in property taxes was calculated assuming a residence with $400,000 assessed value and each state's average tax rate.
How much they paid in sales taxes was calculated using the IRS' Sales Tax Calculator, which is localized to zip code. To determine those, we used Zillow to determine zip codes with housing inventory close to our sample assessed value.
We also calculated the effective tax rate for a single filer (earning $32,000 a year, with no dependents), but those returns were not used to calculate rankings.