10. Mississippi: You can make out like a bandit here In Mississippi on property taxes, some of the cheapest in the country. (Credit: Shutterstock)
9. Louisiana: Property taxes in Louisiana are the third lowest in the country, but you’ll end up paying sales tax. A lot of sales tax.
8. Arizona: Although Arizona does have an income tax, it’s low.
7. Delaware: One of Delaware’s great attractions is the lack of state or municipal sales taxes. Its property taxes are low, too.
6. North Dakota: Sales taxes are “modest” in North Dakota and favor agriculture, while income taxes have been going in the opposite direction of what you might expect.
5. Nevada: Another sweet refuge from state income tax (there is none), Nevada and its tempting attractions may be singing a siren song to lure you in. But beware — the state has to make money somehow, and it does so through its sales tax.
4. Florida: No income tax, low property tax, but sales tax can nail you in Florida.
3. South Dakota: No income tax, and lower-than-average state and local sales taxes, make South Dakota attractive from a tax standpoint.
2. Alaska: Real estate and sales taxes are “modest,” which makes Alaska even more attractive.
1. Wyoming: Wyoming has no state income tax, although it does have sales tax.
If you’re tired of paying taxes, you might want to consider relocating. After all, different states tax different things, and at different rates—and you might be able to save serious money on some of the taxes levied by your home state if you decide to go elsewhere.
Whether you’re ready to pick up stakes and move, or just want to see how badly (or well) you’re doing where you are, you might want to take a gander at the 10 most tax-friendly states in the country.
Kiplinger has crunched all the numbers and come up with its fifth annual Tax Map — that will tell you all about the current state of taxes in the U.S., from income taxes, sales taxes, gas taxes and “sin” taxes (for products such as alcohol and tobacco) to other tax rules and exemptions.
(Related: Millionaires Love These 10 Small Towns)
Of course, all bets could be off under the current administration with its efforts to overhaul the national tax code. And, as pointed out by Robert Long, managing editor at Kiplinger, in a statement, “As Congress mulls a new federal tax plan that may cut rates and eliminate deductions, Americans should also keep an eye on state and local taxes. Depending on where you’re living, state income taxes and property taxes cost thousands of dollars every year.”
But for the meantime, here are the 10 most tax-friendly states, according to Kiplinger:
You can make out like a bandit here on property taxes, some of the cheapest in the country, as well as on a to-be-lowered-in-2018 income tax (currently the top tax rate is 5%). In addition, there’s no inheritance or estate tax, but that doesn’t mean you’ll get away scot-free.
No indeed — you’re going to pay taxes on all your groceries, at 7% (and that’s before Jackson and Tupelo add their own taxes on top of that, at 1% and 0.25%, respectively), as well as beer ($0.43 per gallon), wine ($0.35 per gallon), sparkling wine ($1 per gallon), liquor ($7.74 per gallon) and cigarettes ($0.68 per pack). Ditto for wireless service, at 9.1%.
And then there’s the annual vehicle property tax (based on age and value, and set by the county in which you live; in Lafayette County, you can expect to fork over $285 on a vehicle valued at $20,000). Oh, and fuel for those vehicles is taxed at $0.19 per gallon for gasoline and $0.18 for diesel.
Property taxes here are the third lowest in the country, but you’ll end up paying sales tax. A lot of sales tax. The state charges 5% on purchases, but localities can add up to another 7%, which makes for an average combined rate of 9.98%. And while the state doesn’t tax groceries or prescription drugs, municipalities might.
Income taxes are low, ranging from 2–6% with an effective rate of 3.2%, and you can deduct federal income tax from your state taxable income. There’s no inheritance or estate tax.
Gasoline and diesel are taxed at $0.20 per gallon, and sin taxes will cost you $0.37 per gallon for beer, $0.11 per gallon for wine, $2.50 per gallon for liquor and $0.36 per pack for cigarettes. If you have a taste for cigars, they’ll cost you an extra 8–20% of the manufacturer’s price. Wireless service is taxed at 7.3%.
Although Arizona does have an income tax, it’s low — Kiplinger says that if you file jointly, you won’t hit the top bracket until your income is over $300,000. There’s no inheritance or estate tax.
The gasoline tax is the fourth lowest in the country, and property taxes won’t bankrupt you either. You’ll pay for the car you put it in, though, with an annual tax of $2.89 (on new vehicles) or $2.80 (on used vehicles) for each $100 of assessed value. So a new $25,000 vehicle would cost you $420 the first year on an assessed value of $15,000.
Sin taxes on cigarettes cost $2.00 per pack, while cigars are taxed at $0.22 to $2.20 per 10 cigars. On potent potables, you’ll pay as follows: beer, $0.16 per gallon, wine, $0.84 per gallon and liquor $3 per gallon. Wireless service is taxed at 12%.
One of Delaware’s great attractions is the lack of state or municipal sales taxes. Its property taxes are low, too, which is another draw. (The sales tax thing is so popular, by the way, that New Jersey has actually cut sales tax in half on lots of items in Salem County, which borders Delaware.)
Income tax, on the other hand, is not so alluring; the top rate of 6.6% hits taxable income over $60,000 for both single and joint filers. And while there may not be a sales tax, you’re still going to have a little extra tacked on to the bills for gasoline ($0.23 per gallon), diesel ($0.22 per gallon), “sinful” wares (beer, $0.16 per gallon; wine, $0.97 per gallon; liquor, $3.75 per gallon; cigarettes, $1.60 per pack) and wireless service, at 6.3%.
Still one other thing to keep in mind is that the state has no inheritance tax. Its estate tax expires at the end of 2017; the estate-tax exemption is $5.49 million for 2016 and the maximum estate-tax rate is 16%.
6. North Dakota
Sales taxes are “modest” in North Dakota and favor agriculture — taxes on farm machinery and equipment are taxed at a lower rate than other goods — while income taxes have been going in the opposite direction of what you might expect; they’ve actually been declining for several years. Property taxes aren’t cheap, but they’re not expensive — and the state looks likely to be able to maintain a tax-friendly status in the future, if its score for fiscal stability is any indication.
Gasoline and diesel are taxed at the same rate, $0.23 per gallon, while vehicles face an excise tax of 5% on purchases. Sin taxes hit beer at $0.39 per gallon, wine at $1.06 per gallon and liquor at $4.66 per gallon, and all alcohol is also subject to a 7% sales tax. Cigarettes will set you back an extra $0.44 per pack, while cigars and pipe tobacco will run you 28% of the wholesale price on top of your purchase price.
And while there’s no inheritance tax or estate tax, your wireless services will be taxed at 12.3%.
Another sweet refuge from state income tax (there is none), Nevada and its tempting attractions may be singing a siren song to lure you in. But beware — the state has to make money somehow, and it does so through its sales tax; the average combined state and local rate runs 7.98%. Property taxes aren’t bad, and neither are vehicle taxes — in fact, there are no state sales taxes on private-party vehicle sales — but there is an annual tax on that vehicle, based on value and age.
Once you’ve got the car, though, you’ll pay an extra $0.34 per gallon for gasoline and an extra $0.29 per gallon for diesel. And if you’re planning on a vintage bottle of wine or a few martinis with that special dinner, be aware that liquor carries an extra cost of $3.60 per gallon, while beer is taxed at $0.16 per gallon and wine at $0.70 per gallon. Not horrendous, but still… Cigarettes will cost you an extra $1.80 per pack — maybe you should quit? — while other tobacco products are taxed at 30% of the wholesale price.
And while there’s no lodging tax in the state, in Las Vegas (and other municipalities) there is; you can expect to pay 12% more for your room there. Wireless services only rate a 2% tax, and there’s no inheritance or estate tax.
But Nevada taxes entertainment at 5 or 10%, depending on the venue size. Some forms of entertainment are exempt, such as “instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen.”
So sing and play softly.
No income tax, low property tax, but sales tax can nail you in Florida. The state gets 6%, and municipalities can add another 2% — making the average combined rate 6.8%.
Vehicle purchases are taxed at 6%, and county sales tax is assessed on the first $5,000 of the purchase price. Gasoline taxes will set you back another $0.37 per gallon, while diesel tax is $0.34 per gallon; cigarettes are taxed at $1.34 per pack, while cigars aren’t taxed at all. But all other tobacco products carry a tax of 85% of the wholesale price.
Beer will cost you an extra $0.48 per gallon; wine, $2.25 per gallon; liquor is worst, though, at $6.50 per gallon. And wireless services are taxed at 14.7% — not cheap either. But considering there’s no estate or inheritance tax, it’s maybe not such a bad deal.
Oh, and Florida is kid-friendly; youth bicycle helmets, booster seats and other child restraint systems are exempt from sales tax.
3. South Dakota
No income tax, and lower-than-average state and local sales taxes, make South Dakota attractive from a tax standpoint. Median property taxes aren’t horrible either, and you’ll pay an excise tax of 4% when you title a vehicle.
Fueling that vehicle will cost you an extra $0.30 for gasoline or for diesel, and going somewhere to celebrate your new home will cost you $1.53 per pack in taxes for cigarettes, 35% of the wholesale price for other tobacco products, $0.27 per gallon for beer and other malt beverages, $1.21 per gallon for wine and $4.66 per gallon for liquor. Lodging carries a state tourism tax of 1.5%, but municipalities can tack an additional 1% on to lodging, drinks, meals and entertainment — as well as sales tax.
Wireless service is taxed at 13.1%, but there are no inheritance or estate taxes.
Not only does Alaska not charge an income tax, it pays its legal residents (who’ve lived there at least a year) an annual stipend that comes out of its “Permanent Dividend Fund,” financed by the state’s taxes on energy production. Real estate and sales taxes are “modest,” which makes it even more attractive — it has no state sales tax, but municipalities can impose them and can go as high as 7.5%. But the statewide average is 1.76%.
Fuel taxes are the lowest in the country, at $0.12 per gallon for gasoline and $0.13 for diesel. Vehicle sales are taxed, as are registrations, with the registration tax based on vehicle class and model year.
Cigarettes are taxed at $2 per pack, but cities can add up to $2.50 more. Other tobacco products are taxed at 75% of the wholesale price. Beer and hard cider are taxed at $1.07 per gallon, while wine is taxed at $2.50 per gallon and liquor at $12.80 per gallon. You may find yourself giving up those evening martinis. Wireless service is taxed at 12.7%, and while there’s no statewide lodging tax municipalities can charge their own — in Anchorage it will cost you 12% in “bed tax.” But there’s no inheritance or estate tax, so that counts for something.
The most tax-friendly state in the Union thanks to revenues from oil and mineral rights, Wyoming has no state income tax, although it does have sales tax. The state charges 4.5%; municipalities add as much as 2%, with the average combined rate 5.42%. Median property taxes aren’t bad, and sales tax on vehicles is levied by the purchaser’s county of residence.
Gasoline and diesel are both taxed at $0.24 per gallon, while beer is taxed at a paltry $0.02 per gallon — the lowest in the country. Wine tax is $0.28 per gallon; liquor $0.95 per gallon; but the state controls wine and liquor distribution and adds a 17.6% markup before the retail sale. Cigarettes and moist snuff are taxed at $0.60 per pack (the former) and per ounce (the latter).
Wireless is taxed at 0.8%, and there are no inheritance or estate taxes.
— Related on ThinkAdvisor: