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- Most and Least Tax-Friendly States
- Tax Impact on Population Growth
- Expert Insights: Moving and Taxes
- Methodology
- Full Dataset
- Most and Least Tax-Friendly States
- Tax Impact on Population Growth
- Expert Insights: Moving and Taxes
- Methodology
- Full Dataset
Updated: September 3, 2024
Advertising & Editorial Disclosure
Every state handles taxes a little differently, and which state you live in can have a significant impact on your wallet. While citizens have long since considered the cost of living and taxes when determining where to move, the debate has only intensified with the rise of remote work and the idea that you're not necessarily tied to the same location as your employer.
So, which states are the most tax-optimized? To assess the tax-friendliness of all 50 states and the District of Columbia, MoneyGeek analyzed data from the U.S. Census Bureau, the Tax Foundation and the U.S. Bureau of Labor Statistics’ Consumer Expenditure survey. Using this data, MoneyGeek awarded each state a tax-friendliness grade, giving an “A” to the states with the smallest tax burden and an “F” to the states with the largest. MoneyGeek considered sales, income and property taxes in its calculations. The analysis also explored how each state’s tax-friendliness rating related to its population growth from 2021 to 2022. (Learn more in the Methodology section.)
CORRECTION NOTICE
The original tax amounts for each state in our story about the tax-friendliest states were calculated using incorrect data. As a result, the rankings were inaccurate. We apologize for any confusion this may have caused and have since corrected and updated the data as of May 14, 2024.
KEY FINDINGS
Wyoming is the most tax-friendly state, where residents pay $2,877 annually. Illinois is the least tax-friendly state; there, families pay $12,916 in annual taxes.
For a typical middle-class family, the tax burden difference between living in the highest-tax state (Illinois) and the lowest-tax state (Wyoming) is $10,040 per year.
States that received an A in tax-friendliness experienced above-average population growth (1%); states with an F saw a decline (-0.8%).
Florida, which received an A and ranked as the No. 4 most tax-friendly state in the nation, saw a 2.1% increase in its population growth — the largest of any state.
New York, which received an F and ranked as the second-worst state for tax burdens, saw the biggest population decline (-0.8%) in the U.S.
The 10 Most (and Least) Tax-Friendly States in America
To find the most tax-friendly states in America, MoneyGeek estimated the state taxes paid by a typical middle-class family. In this analysis, a typical middle-class family was defined as a married couple with one dependent making the median national income ($94,003) and owning a home valued at the national median ($320,900).
MoneyGeek’s analysis found that Wyoming is the most tax-friendly state in America, followed by Nevada, Tennessee, Florida and Alaska. Except for Arizona, states that received a grade of A all share something in common: no state income tax. Texas — which received a B — also has no state income tax. On average, taxes in the most tax-friendly states only comprised 5% of the typical household’s income.
On the other hand, taxes made up 11% of a typical family’s income in the 10 states with the highest tax burdens. In Illinois — the least tax-friendly state in America and one of two states to receive an F grade in this analysis — taxes make up an eye-popping 13% of household income.
Notably, all of the 10 least tax-friendly states are located in either the Northeast or the Midwest.
The 10 States With the Lowest Tax Burden
State | Grade | Tax as% of Income | |
|---|---|---|---|
1. | Wyoming | A | 3.3% |
2. | Nevada | A | 4.3% |
3. | Tennessee | A | 4.3% |
4. | Florida | A | 5.0% |
5. | Alaska | A | 4.3% |
6. | Washington | A | 6.5% |
7. | South Dakota | A | 4.5% |
8. | North Dakota | A | 4.4% |
9. | Arizona | A | 5.8% |
10. | Montana | B | 6.1% |
The 10 States With the Highest Tax Burden
State | Grade | Tax as% of Income | |
|---|---|---|---|
1. | Illinois | F | 13.0% |
2. | New York | F | 13.7% |
3. | Connecticut | D | 11.7% |
4. | New Jersey | D | 13.5% |
5. | Iowa | D | 9.7% |
6. | Kansas | D | 9.6% |
7. | Nebraska | D | 9.2% |
8. | Massachusetts | D | 12.0% |
9. | Michigan | D | 9.4% |
10. | Vermont | D | 10.1% |
Analysis Shows Higher Population Growth in Lower Tax States
For many, the pandemic altered their perceptions about where they want to live and where they can live. Millions of city-weary residents aching for more space — and having more mobility due to the rise in popularity of remote work — have relocated in recent years. Have taxes influenced their decision to move to a new state? MoneyGeek’s analysis suggests that the answer is “yes.”
Analysis of state tax burden rates and the change in population from 2021 to 2022, as estimated by the U.S. Census Bureau, shows that taxes and population growth are related in some states.
While the average population growth in the U.S. was 0.5%, the most tax-friendly states (those that received an A grade) saw above-average population growth at 1%. Florida — awarded an A grade and ranked as the fourth most tax-friendly state — saw the highest population growth in the nation at 2.1%. Nevada (No. 2), Tennessee (No.3) and Arizona (No. 9) — also A-graded states — also saw above-average growth at 1.1% each.
Both of the two states with an F grade had population declines in 2022. Among the ten states with a D grade, four — New Jersey, Michigan, Oregon and Wisconsin — saw population declines. Other D-grade states (Massachusetts, Iowa, Kansas, Nebraska and Vermont) saw no population growth or had growth below the national average.
Expert Insights: Moving and Taxes
Moving to a different state is a big step, and from a tax perspective, it can get complicated. MoneyGeek interviewed several experts to elaborate on the unique tax issues that moving presents and what you may need to take into account if you're considering relocating across state lines. The views expressed are the opinions and insights of the individual contributors.
- What tax implications should someone consider if they're moving from one state to another? What records would they need to show, if any?
- What factors determine where your true home is?
- How does working remotely affect one’s taxes? Similarly, what if you work in one place but choose to live in another because you can now work from home? What happens if you choose to work remotely out of another state for a period of time?
- How can someone looking to optimize their taxes do so by moving states?
D’Arcy Becker, PhDProfessor and Chair of Accounting at the University of Wisconsin
Edward Morse, JDProfessor of Law and McGrath North Endowed Chair in Business Law, Creighton University School of Law, Omaha, Nebraska
Brian Huels, CPAAssociate Professor of Accounting at the University of Wisconsin-Whitewater
Sutirtha Bagchi, Ph.D.Associate Professor, Economics at Villanova University
Brandon Di Paolo Harrison, PhDAssistant Professor of Accounting at Austin Peay State University
James Guarino, CPAManaging Director, Tax Practice at Baker Newman Noyes
Sebastián Leguizamón, PhDDirector, Centre for Applied Economics, and Associate Professor, Economics at Western Kentucky University
Caroline Chen, JDAssociate Professor at San Jose State University
William SmithChair, David A. Johnson Professor in Predictive Analytics at the University of West Georgia
Ann MurphyProfessor of Law at Gonzaga University
Perry J. GreenChief Financial Officer at Waddell & Associates
Barbara SchreihansFounder and Chief Executive Officer of Your Tax Coach
Nichole Williams, CPASr. Tax Manager & Shareholder at Truepoint Wealth Counsel
Stacy MastroliaAssociate Professor of Accounting at Bucknell University
Aaron Rubin, JDPartner at WRP Wealth Management
Timothy FogartyProfessor at Case Western Reserve
James CliftonAssistant Professor of Accounting Practice at North Dakota State University
Hrishikesh "Hrish" Desai, PhDAssistant Professor of Accounting at Arkansas State University
Jeffry R. Haber, PhDProfessor of Accounting at Iona University
Mark Koscinski, CPAAssistant Professor of Accounting Practice at Moravian University in Bethlehem
Nichole DauenhauerAssociate Professor of Accounting at Lakeland Community College
Karen McGrath, Ph.D.Assistant Professor of Finance at Bucknell University
Valrie Chambers, PhDAssociate Professor of Accounting at Stetson University
Gunter DufeyProfessor Emeritus of Corporate Strategy and International Business at Ross School of Business, University of Michigan
Dan SuditPartner at Crewe Advisors
Robert Roper, CPASenior Tax Manager at Kroon & Mitchell
Stan Veliotis, PhDAssociate Professor and Chair of the Accounting & Tax Department at Fordham University's Gabelli School of Business
Sam Motes, CPATax Associate at Truepoint Wealth Counsel
Noel Dalmacio, CPAPresident at Dalmacio Accountancy Corp
Joshua ZimmelmanManaging Director of Westwood Tax & Consulting
Mitchell NovitskyDirector, Eisner Advisory Group LLC
Krystal Pino, CPAFounder at Nomad Tax
John PetosaProfessor of Practice at Syracuse University
Edward Charles Randle, PhDAssistant Professor of Accounting at Winthrop University
Michael EcksteinEnrolled Agent and Owner at Resting Business Face and Eckstein Tax Services
Susan PetraccoVice President of Integrations at AccurateTax
Wilton HymanProfessor of Law at New England Law
Suchot SundayEntrepreneur & Business Coach
Vincent J. CincottaTax Principal, CPA
Daniel ShaviroWayne Perry Professor of Taxation at NYU Law School
Thomas M. Spade, CPASenior Instructor of Accounting, College of Charleston
Leanne Scott, JDTax Principal at Baker Newman Noyes
Mark McKnight, PhDProfessor of Accounting at the University of Southern Indiana
Christian J. Burgos, CMIManaging Principal at Friedman LLP State and Local Tax Practice
Craig LawlessPrincipal, State and Local Tax, at The Bonadio Group
Vincenzo Villamena, CPACEO at Online Taxman
Steven J. Weil, PhDPresident, Enrolled Agent and Licensed Community Association Manager at RMS Accounting
Marcia Nally, CPAPartner with Moore Colson CPAs and Advisors
Kimberly S. Krieg, PhDAssistant Professor of Accounting at the University of San Diego School of Business
Jeff ZhouCEO & Co-Founder of Fig Loans
Nancy AndersonNational Director of Wealth Planning & Trust Services, Calamos Wealth Management
Daniel LeeSenior Wealth Manager at Plancorp
Henry GrzesHenry Grzes, Lead Manager for Tax Practice & Ethics American Institute of CPAs
Ani HovanessianPartner and Chair of the New York Tax and Wealth Planning Group at Venable LLP
Jared WalczakVice President of State Projects, Tax Foundation
John BonkPartner and State & Local Tax Leader, Marcum Accountants and Advisors
Sharon AckermanDirector, State and Local Taxation at Anchin, Block & Anchin
Edward ZelinskyMorris and Annie Trachman Professor of Law
Francine LipmanProfessor of Law at University of Nevada Las Vegas (UNLV)
Methodology
To calculate the least and most tax-friendly states in America, MoneyGeek researched income tax and sales tax rates by state using data from the Tax Foundation. Property tax rates were sourced from the U.S. Census Bureau.
Using expenditure and income data from the Bureau of Labor Statistics’ Consumer Expenditure Survey and income and housing data from the U.S. Census Bureau, MoneyGeek constructed a hypothetical family with one dependent, a gross income of $94,003 (the national median income at the time of research), a home worth $320,900 (the median home price at the time of research) and annual taxable purchases of $22,203.
MoneyGeek then estimated the state taxes this hypothetical family would pay in each state. States were ranked based on the estimated total taxes and assigned letter grades from A to F based on the size of the tax payment:
- Grade A: $2,877 to $4,884
- Grade B: $4,885 to $6,891
- Grade C: $6,892 to $8,899
- Grade D: $8,900 to $10,907
- Grade F: $10,908 to $12,916
Population growth information was sourced from the U.S. Census Bureau.
If you have any questions about MoneyGeek's findings or methodology, please reach out via email to [email protected].
Full Dataset
The data points presented are defined as follows:
- Grade: Based on the size of overall tax payment, with a grade of “A” reflecting a state with the lowest tax payment and a grade of “F” reflecting a state with the highest tax payment.
- Estimated Taxes: Tax amount due for married joint-filers with one independent, a gross income of $94,003, a home valued at $320,900 and annual taxable purchases of $22,203. Considers federal income tax, local income tax, state income liability, state/local sales tax and state property tax.
- Tax as % of Income: Presents total taxes paid as a percentage of income.
- Change in Population 2022: Percentage change in a state’s population from 2021 to 2022.
Rank | State | Grade | EstimatedTaxes | Tax as% of Median Income | Change in Population 2022 |
|---|---|---|---|---|---|
1 | Wyoming | A | $2,877 | 3.3% | 0.4% |
2 | Nevada | A | $3,171 | 4.3% | 1.1% |
3 | Tennessee | A | $3,771 | 4.3% | 1.1% |
4 | Florida | A | $3,846 | 5.0% | 2.1% |
5 | Alaska | A | $3,921 | 4.3% | 0.1% |
6 | Washington | A | $4,412 | 6.5% | 0.6% |
7 | South Dakota | A | $4,582 | 4.5% | 1.6% |
8 | North Dakota | A | $4,652 | 4.4% | 0.6% |
9 | Arizona | A | $4,819 | 5.8% | 1.1% |
10 | Montana | B | $4,929 | 6.1% | 1.7% |
11 | Colorado | B | $6,134 | 7.4% | 0.5% |
12 | Delaware | B | $6,403 | 7.0% | 1.5% |
13 | California | B | $6,406 | 9.7% | -0.5% |
14 | Texas | B | $6,495 | 7.2% | 1.7% |
15 | South Carolina | B | $6,502 | 7.0% | 1.8% |
16 | Idaho | B | $6,571 | 8.0% | 2.0% |
17 | Louisiana | B | $6,579 | 6.9% | -0.7% |
18 | New Mexico | B | $6,586 | 7.1% | -0.1% |
19 | North Carolina | B | $6,660 | 7.3% | 1.4% |
20 | Indiana | B | $6,778 | 6.8% | 0.4% |
21 | Missouri | C | $6,933 | 7.0% | 0.2% |
22 | Alabama | C | $7,075 | 7.3% | 0.7% |
23 | District of Columbia | C | $7,097 | 8.6% | 0.3% |
24 | Arkansas | C | $7,161 | 7.3% | 0.7% |
25 | Kentucky | C | $7,220 | 7.3% | 0.1% |
26 | Utah | C | $7,370 | 9.1% | 1.3% |
27 | West Virginia | C | $7,453 | 7.4% | -0.4% |
28 | Mississippi | C | $7,579 | 7.6% | -0.3% |
29 | Ohio | C | $7,743 | 7.4% | -0.2% |
30 | Hawaii | C | $7,851 | 9.8% | -0.1% |
31 | Virginia | C | $7,856 | 8.8% | 0.5% |
32 | New Hampshire | C | $7,999 | 9.5% | 0.4% |
33 | Oklahoma | C | $8,018 | 8.1% | 0.8% |
34 | Rhode Island | C | $8,237 | 9.8% | -0.2% |
35 | Maine | C | $8,287 | 9.2% | 1.0% |
36 | Pennsylvania | C | $8,408 | 8.6% | 0.1% |
37 | Maryland | C | $8,545 | 9.6% | 0.0% |
38 | Minnesota | C | $8,663 | 9.3% | 0.2% |
39 | Georgia | C | $8,716 | 9.6% | 1.0% |
40 | Wisconsin | D | $8,940 | 9.2% | -0.1% |
41 | Oregon | D | $9,008 | 11.4% | -0.1% |
42 | Vermont | D | $9,185 | 10.1% | 0.2% |
43 | Michigan | D | $9,336 | 9.4% | -0.2% |
44 | Massachusetts | D | $9,355 | 12.0% | 0.0% |
45 | Nebraska | D | $9,360 | 9.2% | 0.2% |
46 | Kansas | D | $9,990 | 9.6% | 0.1% |
47 | Iowa | D | $10,447 | 9.7% | 0.2% |
48 | New Jersey | D | $10,701 | 13.5% | -0.1% |
49 | Connecticut | D | $10,783 | 11.7% | 0.6% |
50 | New York | F | $10,948 | 13.7% | -0.8% |
51 | Illinois | F | $12,916 | 13.0% | -0.7% |
About Doug Milnes, CFA
Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.
Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.
