Tax season is here, and for many people across the U.S., figuring out how much they owe in taxes can be a stressful process. Whether you’re filing individually or as a couple, where you live plays a huge role in determining your tax burden. A recent analysis of U.S. Census Bureau data, combined with state and federal tax rates, highlights the states where residents pay the most—and the least—in taxes as a percentage of their annual income.
States with the Highest Tax Burdens
Living in a state with high taxes can significantly impact your ability to save and invest for the future. Here are the top five states where individual taxpayers face the steepest tax burdens:
1. Massachusetts: 23.67%
- Massachusetts tops the list with the highest tax burden for individual taxpayers. The state’s reliance on income tax is a major factor, with over half (56.1%) of its revenue coming from this source. If you’re planning to retire early, Massachusetts might make it difficult to grow your savings.
2. Oregon: 23.37%
- Oregon closely follows Massachusetts. The state relies heavily on personal income tax, accounting for 62.3% of its revenue. On the upside, Oregon does not have a sales tax, which might be a slight relief for residents.
3. Connecticut: 23.19%
- Connecticut is known for its high-income tax rate and is particularly unfriendly to retirees. The state partially taxes Social Security income and fully taxes withdrawals from retirement accounts, making it a challenging place for those looking to enjoy their golden years.
4. Hawaii: 22.79%
- Hawaii not only has a high tax burden but also the highest cost of living in the U.S. The state’s remote location and dependence on imported goods drive up costs for residents, adding to the financial strain.
5. Maryland: 22.58%
- Maryland rounds out the top five, with a high tax burden for individuals. However, the state does offer some relief for retirees, as Social Security income is not taxed, and retirement fund withdrawals and public pension income are only partially taxed.
Also Read: Waiting on Your Social Security Check? These Are the Dates You Need to Circle!
States with the Lowest Tax Burdens
On the flip side, some states offer a much lighter tax burden, allowing residents to keep more of their hard-earned money. Here are the states where individual taxpayers pay the least in taxes:
1. Florida: 15.75%
- Florida takes the crown for the lowest tax burden among individual filers. The state is one of nine that has no income tax, making it an attractive destination for those looking to minimize their tax payments. However, property taxes in Florida can be higher than in other states.
2. Tennessee: 15.77%
- Like Florida, Tennessee also has no state income tax. But residents should be aware of the state’s high sales tax, which accounts for a significant portion (56.9%) of its revenue.
3. Nevada: 15.78%
Nevada is another state with no income tax, relying instead on taxes from gambling and a high sales tax. This approach helps keep the overall tax burden low for residents.
4. South Dakota: 15.78%
South Dakota also boasts no state income tax. However, the state relies heavily on sales tax (61.6% of its revenue), which could be a downside for residents who spend a lot.
5. Texas: 15.99%
Texas, like the other states with low tax burdens, does not have an income tax. The state relies heavily on sales tax, which brings in nearly 60% of its revenue.
Tax Burdens for Couples Filing Jointly
For couples filing jointly, the tax landscape can look a bit different. Here are the states with the highest and lowest tax burdens for joint filers:
Highest Tax Burdens:
- Massachusetts: 23.49%
- Hawaii: 23.34%
- Connecticut: 23.17%
- Maryland: 22.83%
- Oregon: 22.57%
Lowest Tax Burdens:
- Tennessee: 15.55%
- Florida: 15.64%
- Wyoming: 15.66%
- Nevada: 15.73%
- South Dakota: 15.77%
Conclusion
Choosing where to live can have a significant impact on your finances, especially when it comes to taxes. States with lower tax burdens can help you save more money, but it’s essential to consider other factors like sales tax, property tax, and the overall cost of living. Whether you’re planning for retirement or just trying to manage your monthly budget, understanding how state taxes affect your finances is crucial.