They say that location is the most important aspect of buying a home, but this does not apply to just real estate. Where you live can have a major impact on your cost of living and the ability to make ends meet. Tax rate is a driving force in determining this.
For many people who move to different states, job opportunities are usually the deciding factor but those who have some power over where they live can take advantage of lower tax states. A variety of taxes, from property to inheritance and excise, can have a large impact on your finances. Here are the states with the lowest tax rates. Is your home one of them?
Alabama Has A Low Cost Of Living And Low Taxes
The state of Alabama is known for its low cost of living and is considered to be a tax-friendly state. The income levels in the state are quite moderate and it doesn’t take too much to find yourself in the highest income tax bracket. You are also allowed to deduct your federal income taxes.
The state income tax is set at 2 percent and 5 percent for more than $6,000 of taxable income. For homes that have an average value of $100,000, the property taxes are $432. The local sales tax in Alabama is 9.16 percent and the price of gas is 0.2721 per gallon.
Alaska Has No State Income Tax
Alaska is considered to be one of the most tax-friendly states in the U.S. This is because every resident that lives in the state for a full year receives a Permanent Fund Dividend but this dividend has shrunk in recent years. In 2019 each resident received $1,606 from the dividend.
There is no state income tax in Alaska and the property tax for a $100,000 home is $1,234. The sales tax is set at 1.76 percent but the largest city in Alaska, Anchorage, has no sales tax. The price of gas is 0.1432 per gallon.
Sales Tax Is Exempt On Many Products In Arizona
Arizona is also considered to be a very tax-friendly state. Your income is not taxed until it reaches $158,996 for individuals and $317,990 for a married couple. Many products, like prescription drugs and food for consumption, do not have any sales tax.
The state income tax in Arizona is 2.59 percent up to $21,202 for an individual or 4.54 percent on more than $317,990. The average property tax is $754 and the sales tax is set at 8.39 percent. The price of gas is 0.1099 per gallon.
Are You Surprised To See California On The List?
California is one of the more tax-friendly states in the U.S and this can often come as a surprise for many. However, the tax rate hits the hardest for high-income earners. For people earning a modest income, the tax rate is only 1 percent. However, the Golden State has the highest sales tax in the nation.
The state income tax is 1.1 percent for income up to $8,544 and 13.3 percent for people making more than a million dollars annually. The sales tax is 8.66 percent and the property tax for a $100,000 home is $841.
A Flat Tax Makes Colorado Appealing To Many
Colorado, also known as the Centennial State, is a tax-friendly state because it has a flat tax. The tax rate regardless of income level is 4.63 percent. This is a huge incentive for people to move to this state.
Colorado is also a huge market for cannabis that has a 15 percent excise tax. This is in addition to the local sales tax levied on the sale of cannabis. The property tax for a $100,000 home is $607 and the state and the local tax rate is 7.63 percent. The price per gallon of oil is $0.2200.
Delaware is known for being one of the most tax-friendly states in America. This is because, among all the states in the East Coast, Delaware has no sales tax and a very low property tax. People with a salary above $60,000 need to pay a tax of 6.6 percent and the city of Wilmington in Delaware has an additional 1 percent wage tax.
The state income tax in Delaware is 2.2 percent for people with an income from $2,000 to $5,000 and 6.6 percent for income above $60,000. The average property tax is $604 and the price per gallon of gas is $0.2300.
Florida Has Relatively Low Property Taxes
Florida, also known as the Sunshine State, is also one of the most tax-friendly places in America because it has no state income tax. The property taxes in Florida are also much lower than the nation’s average.
The average property tax in Florida is $1,041 for a $100,000 home and the state and the local tax rate is set at 7.05 percent. The price per gallon of gas is $0.4199. The state also exempts cigarettes from taxes and is only one of two states in the U.S to do this.
Louisiana Residents Can Deduct Their Federal Income Tax
Louisiana, also known as the Pelican State, is also one of the most tax-friendly states in the U.S. This is because this state has some of the lowest property tax rates in the country. Most residents in Louisiana have a tax bill of less than $1,000 but the sales tax in the state is quite high.
Residents are allowed to deduct their federal income tax. The state income tax is set at 2 percent for people earning less than $12,500 and 6 percent for people earning more than $50,000. The average property tax is $555 and the sales tax rate 9.45 percent.
$5,000 Of An Individual’s Income Is Exempt From Taxes In Mississippi
Mississippi, also known as the Magnolia State is one of the most tax-friendly places in the U.S. because of its low property taxes. In addition to this, the tax levied on income has also been eased this year. In 2020, $5,000 of a person’s income will be exempt from taxes.
The income tax in the state is 3 percent for people earning more than $1,000 and 5 percent for people earning more than $10,000. The property tax is $862 and the sales tax is set at 7.07 percent. The price of a gallon of gas is $0.1879.
“Treasure State” Montana Has No Sales Tax
Montana is also known as the Treasure State and is only one of five states in the U.S. that do not have any sales tax. This is in addition to the state’s incredibly low property taxes. However, when it comes to income tax, the high-income rate is levied at just $17,900.
Residents of Montana can deduct their federal income tax from the state tax filing. The income tax is 1 percent for $3,000 and 6.9 percent for income above $17,900. The average property tax is $892, and the price per gallon of gas is $0.3275.
Nevada Is Another State Without An Income Tax
Nevada, also known as the Silver State, is another place that is very tax-friendly because there are no income taxes. Much of the state government’s revenue comes from the gaming industry and the sales tax which is the thirteenth-highest tax rate in the nation.
The property tax for a $100,000 home is $693 and the local and state tax rate is 6.89 percent. The price per gallon of gas is $0.3378. The state’s primary tax revenue comes from the casinos and entertainment sectors.
New Hampshire Levies No Taxes On Earned Income
New Hampshire is also an incredibly tax-friendly state because there are no taxes levied on earned income. However, there are limited taxes imposed on dividend and interest income. In addition to this, there are no sales taxes either making the Granite State and attractive place to live in.
The property tax on a $100,000 home is approximately $2,296 and the price per gallon of gas is $0.2383. A majority of the state’s income is earned on the high property taxes. Apart from this, New Hampshire has a fairly low cost of living when compared to other states.
New Mexico Has Relatively Low Income Taxes
New Mexico is also a tax-friendly state because of its relatively low taxes on income. The property taxes in the state are also low, however, the sales tax can be quiet high. The top income tax rates are set at 4.9 percent for individuals earning above $16,000 and married couples earning a joint income above $24,000.
An individual earning an income up to $5,500 or a married couple earning an income above $8,000 needs to pay 1.7 percent in taxes. The average property tax for a $100,000 home is $830 and the sales tax rate is 7.82 percent.
North Carolina Has Become A Flat Rate State
North Carolina, also known as the Tar Heel State, has become more tax-friendly in recent years as they have changed up their tax structure to a flat rate. The progressive tax has now become a flat tax rate of 5.49 percent.
In 2019, this tax rate dropped to 5.25 percent. However, they make up for this low tax rate with a sales tax of 6.95 percent. The property tax on a $100,000 home is approximately $894 and the price per gallon of gas is $0.3645.
North Dakota Has Virtually No Income Tax
North Dakota is one of the most tax-friendly states in the U.S. because it’s income tax is basically non-existent. They also have a sales tax that favors agricultural produce. The property taxes are also quite affordable and the current financial stability shows that the state’s taxes will remain favorable in the future.
The state income tax is 1.10 percent for income up to $38,700 and 2.20 percent for income over $424, 950. The sales tax rate is 6.83 percent and the average property tax is $894. The price of a gallon of gas is 23 cents.
South Dakota Also Makes The List
South Dakota, or the Mount Rushmore State, is also known for being incredibly tax-friendly because they have no state income tax. In addition to this, the local and state sales tax is also below the national average. However, there is still a sales tax levied on groceries.
The property tax on an average $100,000 home is $1,388, which is high compared to other states. The local and state sales tax is 6.4 percent and the price per gallon of gas is $0.3000. This makes South Dakota one of the most affordable places to live in the U.S.
Tennessee: No Income Tax But A High Tax On Beer
Another tax-friendly location is Tennessee because there is no state income tax. However, there is still a tax levied on interest and dividends. The income tax is offset by the high sales tax which can make the cost of living in Tennessee quite steep. The rate of 9.47 percent is said to be one of the highest in the country.
The average property tax for a $100,000 home in Tennessee is $768 and the sales tax is 9.47 percent. The price of a gallon of gas is 26 cents. This state also has the highest beer tax which $1.29 for each gallon.
The Lone Star State Has Two Tax Extremes
The Lone Star State has two extremes when it comes to tax rates. There is no state income tax in Texas, however, this is offset by their high property and sales taxes. Texas is known for its various oil and gas reserves so the price of fuel is quite low.
The property tax for a $100,000 home is $1,993, one of the highest in the nation. The state and local sales tax is 8.19 percent which makes the cost of living in Texas high. This state is in the middle ground when it comes to their tax rates.
Washington Is Relatively Tax-Friendly
Washington is known for being one of the most tax-friendly states in the U.S because there are no state income taxes. However, the Evergreen State makes up for this with its high sale tax rate. A comparison shows that Washington has the fourth-highest sales tax rate in the country. They also have an estate tax.
The property tax for a $100,000 home is $1,125 and the state and local sales tax is 9.21 percent. The price per gallon of gas in Washington is $0.4940 which is also the fourth-highest price in the U.S.
Wyoming Residents Have A Low Sales Tax
Another tax-friendly state in the U.S is Wyoming because it has no income tax. One of the main reasons for this is because the government earns its revenue from the state’s large oil and mineral rights. The residents in the Equality State also have low sales tax and the lowest beer tax in the country.
The property tax in Wyoming for a $100,000 home is $635 and the local and state sales tax is 5.32 percent which is relatively low when compared to other states in the U.S. The price of a gallon of gas is $0.2400