State Tax Rates Comparison – Sales, Income & Social Security Tax

percentages tax ratesThe Federal Government taxes everyone’s income according to the same scale, but each state has the ability to set different types of taxes on its citizens, including property tax, sales tax, and income tax. This means the amount of tax you’d pay if you live in Florida may be vastly different than the amount you’d pay if you live in California.

For some states, property and sales taxes are the main sources of revenue. In fact, several states don’t collect income tax at all. Depending on your long-term financial goals, you might want to consider living in such a state – or, at the very least, do your Christmas shopping in a state with no sales tax.

Rates and Types of Various State Taxes

Sales Tax Rates

The only states that don’t collect sales tax are Alaska, Delaware, Montana, Oregon, and New Hampshire. Colorado has the lowest rate among states that have a sales tax at 2.9% – though, depending on local municipalities, the total sales tax rate can be as high as 10.9%. In fact, as of 2015, the combined state and average local sales tax rate in Colorado is a relatively high 7.44%, which ranks as 15th-highest in the United States.

While most states permit local governments to add their own taxes, some do not, and thus have the same sales tax rate throughout the state. As of March 2016, these states are Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Jersey, and Rhode Island, plus Washington, D.C.

The states with the highest minimum state sales tax rates are:

  • California (7.5%)
  • Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee (7%)
  • Minnesota (6.875%)
  • Nevada (6.85%)
  • Arkansas and Washington (6.5%)
  • Connecticut (6.35%)
  • Texas, Massachusetts, and Illinois (6.25%)
  • Kansas (6.15%)

If you’re planning a big shopping spree, you might want to avoid these states. In some of the no-sales-tax states, you could save a bundle on a big purchase.

Personal Income Tax Rates

Most states collect income taxes, but one reason that Florida and Nevada are such big retiree hot spots (other than the warm weather) is that they don’t collect income taxes at all. In addition, Alaska, South Dakota, Texas, Washington, and Wyoming do not collect income tax, and New Hampshire and Tennessee only collect income taxes on passive income from interest and dividends.

Of the states that do collect income tax, most base the amount off your federal income tax return and allow you to apply any relevant tax deductions and credits. Several states also allow you to deduct the federal income tax you pay: Alabama, Iowa, Louisiana, Missouri, Montana, North Dakota, Oklahoma, Oregon, and Utah.


Taxes on Social Security

Another way that retirees can manage their tax burden is to relocate to a state that doesn’t tax Social Security benefits. In addition to the states that don’t collect personal income tax, a majority of the states, plus Washington, D.C., don’t tax Social Security benefits at all. These states are Alabama, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin, and Wyoming. While the Federal Government may tax your Social Security benefits, if you have other income aside from Social Security, these states do not.

States that tax Social Security use one of three methods:

  1. Minnesota, Nebraska, North Dakota, Rhode Island, Vermont, and West Virginia only tax Social Security in the amount that the Federal Government taxes it.
  2. You’ll only be taxed on your Social Security benefits in Connecticut, Kansas, Missouri, and Montana if you have other income above a certain, relatively high amount. And Kansas residents don’t pay taxes on Social Security income if their adjusted gross income is less than $75,000, which is one of the higher state allowances.
  3. Colorado, New Mexico and Utah require that federally untaxed Social Security benefits be added back to your federal adjusted gross income to determine the amount that your state taxes will be based on, but then allow you to exclude certain amounts from your income depending on your age.

Retired military personnel also get tax breaks in these states, which allow some or all military pension benefits to go untaxed: Alabama, Alaska, Florida, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming.

Comparative Tax Burden

So with all these differences between states, do the citizens of any state come out significantly ahead or behind of the pack? It depends on your financial situation, whether you own a home, the source of your income, and how much income you have.

A 2009 survey done by Washington, D.C.’s finance office attempted to calculate the tax burden for a family of three making $25,000, $50,000, $75,000, $100,000, or $150,000 per year in the largest city in each state. In this survey, the family was assumed to own a home, except at the $25,000 income level, where they were assumed to rent.

The numbers below show the percent of total income that the family paid towards taxes, including income, property, auto, and sales taxes for the top and bottom five cities in each category.

Highest State Taxes

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Lowest State Taxes

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Final Word

If you’re planning a move to a new state, it may be worth studying the tax burden of your top three choices and see which is optimal for your family – likewise, if you’re planning a big purchase. It’s better to buy a $2,000 computer in a state with no sales tax than in a place like California, where you’d pay 7.5% for the privilege.

How much state taxes do you pay in your area, and how does it compare to other locations in the U.S.?

  • janelle lach

    Automobiles are taxed at the residential state you will register it in, so it does not matter what state you buy it.

  • Kira Botkin

    Do you mean the registration fees? When I’ve purchased vehicles, I’ve always paid sales tax at the time of purchase, with the sales tax rate of wherever I was. They did not inquire where I was going to register it.

    • Birdseye

      SAME IS TRUE WITH BOATS. I bought a cabin cruiser in Conn. and had to pay sales tax the minute I tried to register it in NY.

    • Muelaverde

      haha, wannabe…

  • Jim1rob

    Yes please give factual information. It makes no difference at all if you buy a vehicle in Oregon with no sales tax and live in Washington. You will pay the outrageous sales tax bill to Washington state because that state has sales tax. You will pay that tax when you register the vehicle there. Its the same wherever one lives in the USA. Your home state will demand you pay the Sales Tax to them. No matter what no sales tax state you purchase the vehicle in.

  • Leachski

    We call Pennsylvania home but we do spend about 6 months in South Carolina. We are both retired and have income property in Pa. Does any one know which would be the better place to call our full time residence. I think Pa. would be a better tax advantage and my husband thinks it would be SC. Help!

    • Kira Botkin

      Well, you may in fact be required to file in both as part time residents. I can’t speak to PA or SC specifically, but a lot of states ask you to state how much of your year you spent in each state, and then you’re taxed according to that proportion. However, if your bank accounts and income properties are all in PA, it sounds like you live in PA and vacation in SC.

  • Dubya

    What is the PA. state tax rate?

  • Financial expert for 20+ years

    As a CPA with a master’s degree, I am offended when unqualified people write authoritative articles on subjects for which they are inadequately educated. Please stick to writing about garage sales, gardening and stray animals, assuming you are indeed qualified to write about them, but steer clear of any and all financial subjects.

    • Jim

      I am replying to the CPA with a master’s degree. Colleges and universities do not have a monopoly on learning Sir. Although I have nothing against those that acquired their knowledge though formal education. I would likewise expect those with formal education to give equal respect to those with vast knowledge and education but aquired their knowledge and education through informal means.

      • Limingkb

        Jim, a keyboard and spell check do not make you an expert!

  • Jim

    The city of brotherly love Philadelphia, PA is near the top of the list. I cannot believe the taxes in some of these eastern states. The property taxes are also outrageous. Yet taxes continue going higher. I do not get it. Are the residents in these places working for themselves or the government. At some point these states risk driving away many of their most successful businesses and productive citizens..And as the future pension and medical liabilities for both working and retired government workers at the state and local level continue to spiral out of control the situation will get much worse. .I was listening to a report about the countries physical infrastructure. It could cost 10 trillion to bring in up to just basic standards. Soon almost all of the money that states and local governments allocate for physical infrastructure maintenance will be diverted to pay for unfunded pension and healthcare plans for current and retired state employees. One day that so called civil servent from the city of brotherly love that worked for thirty years and is now sitting by the pool in florida thinking he’s got it made in the shade will get a letter from that city of not so city of brotherly love informing him that because the city has filed for bankruptcy his pension will be chopped in half and he will now have to pay for the majority of his own healthcare expenses.

    • Barb Bird

      Or – maybe the states that charge taxes to their residents (who benefit with roads, schools, police, etc), have more money to do that with no federal help.

      But the states with no taxes get in trouble and guess who has to subsidize them? THE Federal U.S. TAXAYERS.

  • Limingkb

    You can’t avoid tax on a large purchase, such as a car, by going to another state. When you bring the auto back home and apply for the title your state will collect the difference. Get real and think about this stuff… if you could do this people would be doing it all day. This is why average people should not write about topics they have no knowledge of.

  • Taxmesomemore

    Michigan will claim the highest sales tax of 7% if the voters approve in 2015. When we raised from 4 to 6% under Engler we got our property taxes rolled back and future raises tied to a max of 5% or cost of living which every is lower. A good deal. This time, not only do they want more sales tax for ever, they will also raise the gasoline tax to fix the roads. That’s after they reduced the Homestead Property tax and started taxing our retirement if you were younger than 67. And this is a Republican tax and spend state government. And I thought Democrats were bad.

  • Doug Dunfee

    Table not found?

  • stormykitteh

    Highest and lowest state tax summaries are not readable – says “table 5 and 6 not found”