How 'tax friendly' is it where you live? Study gives every state a grade
(NEXSTAR) – The least cheery of all seasons, tax season, is upon us. As you file this year, you may be paying a very different amount than your neighbors in a state next door.
An updated analysis by MoneyGeek, a personal finance site, evaluates how “tax friendly” each state is by evaluating the tax burden on the average citizen. States with low tax burdens earned an A, while those with the highest tax burden earned Fs.
To conduct the study, MoneyGeek looked at how much a hypothetical family would pay in taxes if they were a married couple with one dependent, a gross income of $87,432 (the median national income), and a home worth about $375,000 (the median price of a new home). The lower the taxes on this hypothetical average family, the better the grade.
Unsurprisingly, the states with no state income taxes at all ended up scoring highly. Those eight states are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
However, residents of some of those states end up paying higher sales taxes. The states with the highest sales taxes are Tennessee (9.55%), Louisiana (9.52%), Arkansas (9.51%), Washington (9.23%), and Alabama (9.22%), according to TurboTax.
The states with the highest top personal income tax rates are California, Hawaii, New Jersey, Oregon and Minnesota, TurboTax reports, but that doesn’t necessarily mean people in those states are getting hit hardest in the end. Each of those states has its own complex set of rules of tax credits, deductions and income floors to pay any state taxes at all.
MoneyGeek’s system of grading states on tax burden only holds true for that hypothetical family earning about $87,000 a year with a $375,000 house. A family who just bought a $1 million house in California would probably be paying a lot more in taxes, while a single person earning $40,000 in Texas would pay less.