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MoneyGeek Analysis:

Americans Are Moving to the Most Tax-Friendly States in the Country

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Last Updated: 5/15/2023
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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.)

Key Findings:
  • Illinois is the least tax-friendly state; there, families pay $14,778 in annual taxes. Wyoming is the most tax-friendly state, where residents pay $3,438.

  • 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 $11,340 per year.

  • States that received an A in tax-friendliness experienced above-average population growth (1%); states with an F saw below-average growth (0.1%).

  • Florida, which received an A and ranked as the fifth 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 a D and ranked as the fifth-worst state for tax burdens, saw the biggest population decline (-0.8%) in the U.S.

Map of the most and least tax-friendly states 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 ($87,432) and owning a home valued at the national median ($374,665).

MoneyGeek’s analysis found that Wyoming is the most tax-friendly state in America, followed by Nevada, Tennessee, Florida and Alaska. States that received a grade of A all share something in common: no state income tax. Washington and South Dakota — which both received a B — also have no state income tax. On average, taxes in the most tax-friendly states only comprised 6% of the typical household’s income.

On the other hand, taxes made up 14% 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 1 of 4 states to receive an F grade in this analysis — taxes make up an eye-popping 17% of household income.

Notably, 9 of the 10 least tax-friendly states are located in either New England or the Midwest, with the exception of Nebraska.

The 10 States With the Lowest Tax Burden
State
Grade
Tax as % of Income

1.

Wyoming

A

3.9%

2.

Nevada

A

4.6%

3.

Tennessee

A

5.5%

4.

Alaska

A

5.5%

5.

Florida

A

5.6%

6.

Washington

B

6.5%

7.

North Dakota

B

6.7%

8.

Arizona

B

6.8%

9.

South Dakota

B

7.2%

10.

Colorado

B

7.4%

The 10 States With the Highest Tax Burden
State
Grade
Tax as % of Income

1.

Illinois

F

16.9%

2.

Connecticut

F

15.3%

3.

New Jersey

F

14.8%

4.

New Hampshire

F

14.3%

5.

New York

D

14.1%

6.

Iowa

D

13.8%

7.

Vermont

D

12.8%

8.

Wisconsin

D

12.8%

9.

Nebraska

D

12.7%

10.

Michigan

D

12.5%

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 fifth most tax-friendly state — saw the highest population growth in the nation at 2.1%. Nevada (No. 2) and Tennessee (No.3) — both A-graded states — also saw above-average growth at 1.1% each.

Of the four states with an F grade, two had population declines in 2022. Among the eight states with a D grade, three — New York, Wisconsin and Michigan — saw population declines. Other D-grade states (Nebraska, Iowa and Vermont) saw no population growth or 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.

  1. What tax implications should someone consider if they're moving from one state to another? What records would they need to show, if any?
  2. What factors determine where your true home is?
  3. 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?
  4. How can someone looking to optimize their taxes do so by moving states?
Caroline Chen
Caroline Chen

Associate Professor at San Jose State University

William Smith
William Smith

Chair, David A. Johnson Professor in Predictive Analytics at University of West Georgia

Ann Murphy
Ann Murphy

Professor of Law

Perry J. Green
Perry J. Green

Chief Financial Officer at Waddell & Associates

Barbara Schreihans
Barbara Schreihans

Founder and Chief Executive Officer of Your Tax Coach

Nichole Williams
Nichole Williams

Sr. Tax Manager & Shareholder at Truepoint Wealth Counsel

Stacy Mastrolia
Stacy Mastrolia

Associate Professor of Accounting at Bucknell University

Aaron Rubin
Aaron Rubin

JD, CPA, CFP®️

Timothy Fogarty
Timothy Fogarty

Professor at Case Western Reserve

James Clifton
James Clifton

Assistant Professor of Accounting Practice at North Dakota State University

Dr. Hrishikesh (Hrish) Desai
Dr. Hrishikesh (Hrish) Desai

Assistant Professor of Accounting at Arkansas State University

Jeffry R. Haber, Ph.D., CPA
Jeffry R. Haber, Ph.D., CPA

Professor of Accounting at Iona University

Mark Koscinski, CPA,  MBA, MST,  D.Litt.
Mark Koscinski, CPA, MBA, MST, D.Litt.

Assistant Professor of Accounting Practice at Moravian University in Bethlehem

Nichole Dauenhauer
Nichole Dauenhauer

Associate Professor of Accounting at Lakeland Community College

Karen McGrath
Karen McGrath

Assistant Professor of Finance at Bucknell University

Valrie Chambers
Valrie Chambers

Associate Professor of Accounting at Stetson University

Gunter Dufey
Gunter Dufey

Professor Emeritus of Corporate Strategy and International Business at Ross School of Business, University of Michigan

Dan Sudit
Dan Sudit

Partner at Crewe Advisors

Robert Roper, CPA
Robert Roper, CPA

Senior Tax Manager at Kroon & Mitchell

Stan Veliotis, PhD, Attorney, CPA
Stan Veliotis, PhD, Attorney, CPA

Associate Professor and Chair of the Accounting & Tax Department at Fordham University's Gabelli School of Business

Sam Motes, CPA
Sam Motes, CPA

Tax Associate at Truepoint Wealth Counsel

Noel Dalmacio, CPA, CFP, M.S.
Noel Dalmacio, CPA, CFP, M.S.

President at Dalmacio Accountancy Corp

Joshua Zimmelman
Joshua Zimmelman

Managing Director of Westwood Tax & Consulting

Mitchell Novitsky
Mitchell Novitsky

Director, Eisner Advisory Group LLC

Krystal Pino, CPA, PFS
Krystal Pino, CPA, PFS

Founder at Nomad Tax

John Petosa
John Petosa

Professor of Practice at Syracuse University

Edward Charles Randle, Ph.D., CPA
Edward Charles Randle, Ph.D., CPA

Assistant Professor of Accounting at Winthrop University

Michael Eckstein
Michael Eckstein

Enrolled Agent and Owner at Resting Business Face and Eckstein Tax Services

Susan Petracco
Susan Petracco

Vice President of Integrations at AccurateTax

Wilton Hyman
Wilton Hyman

Professor of Law at New England Law

Suchot Sunday
Suchot Sunday

Entrepreneur & Business Coach

Vincent J. Cincotta
Vincent J. Cincotta

Tax Principal, CPA

Daniel Shaviro
Daniel Shaviro

Wayne Perry Professor of Taxation at NYU Law School

Thomas M. Spade, CPA
Thomas M. Spade, CPA

Senior Instructor of Accounting, College of Charleston

Leanne Scott, JD, LL.M.
Leanne Scott, JD, LL.M.

Tax Principal at Baker Newman Noyes

Mark McKnight
Mark McKnight

Professor of Accounting at the University of Southern Indiana

Christian J. Burgos, J.D., LL.M., CMI
Christian J. Burgos, J.D., LL.M., CMI

Managing Principal at Friedman LLP State and Local Tax Practice

Craig Lawless
Craig Lawless

Principal, State and Local Tax, at The Bonadio Group

Vincenzo Villamena, CPA
Vincenzo Villamena, CPA

CEO at Online Taxman

Steven J. Weil, Ph.D.
Steven J. Weil, Ph.D.

President, Enrolled Agent and Licensed Community Association Manager at RMS Accounting

Marcia Nally, CPA
Marcia Nally, CPA

Partner with Moore Colson CPAs and Advisors

Kimberly S. Krieg, PhD, CPA
Kimberly S. Krieg, PhD, CPA

Assistant Professor of Accounting at the University of San Diego School of Business

Jeff Zhou
Jeff Zhou

CEO & Co-Founder of Fig Loans

Nancy Anderson
Nancy Anderson

National Director of Wealth Planning & Trust Services, Calamos Wealth Management

Daniel Lee
Daniel Lee

Senior Wealth Manager at Plancorp

Henry Grzes
Henry Grzes

Henry Grzes, Lead Manager for Tax Practice & Ethics American Institute of CPAs

Ani Hovanessian
Ani Hovanessian

Partner and Chair of the New York Tax and Wealth Planning Group at Venable LLP

Jared Walczak
Jared Walczak

Vice President of State Projects, Tax Foundation

John Bonk
John Bonk

Partner and State & Local Tax Leader, Marcum Accountants and Advisors

Sharon Ackerman
Sharon Ackerman

Director, State and Local Taxation at Anchin, Block & Anchin

Edward Zelinsky
Edward Zelinsky

Morris and Annie Trachman Professor of Law

Francine Lipman
Francine Lipman

Professor of Law at University of Nevada Las Vegas (UNLV)

Methodology

To calculate the least and most tax-friendly states in America, MoneyGeek researched income and sales tax rates by state using data from the Tax Foundation. Property tax rates were sourced from Rocket Mortgage.

Using expenditure and income data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, income data from the U.S. Census Bureau and housing data from Zillow, MoneyGeek constructed a hypothetical family with one dependent, a gross income of $87,432 (the median national income at the time of research) and a home worth $374,665 (the median new home price at the time of research).

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 E based on the size of the tax payment:

  • Grade A: $3,438–$5,705
  • Grade B: $5,706–$7,973
  • Grade C: $7,974–$10,241
  • Grade D: $10,242–$12,509
  • Grade F: $12,510–$14,778

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 to Melody Kasulis via email at melody@moneygeek.com.

Full Data Set

The data points presented are defined as follows:

  • Grade: Based on the size of 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 $87,432 and a home valued at $374,665. 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.
State
Grade
Estimated Taxes
Tax as % of Income
Change in Population 2022

Wyoming

A

$3,438

3.9%

0.4%

Nevada

A

$4,065

4.6%

1.1%

Tennessee

A

$4,769

5.5%

1.1%

Alaska

A

$4,847

5.5%

0.1%

Florida

A

$4,882

5.6%

2.1%

Washington

B

$5,723

6.5%

0.6%

North Dakota

B

$5,885

6.7%

0.6%

Arizona

B

$5,965

6.8%

1.1%

South Dakota

B

$6,321

7.2%

1.6%

Colorado

B

$6,469

7.4%

0.5%

Delaware

B

$6,542

7.5%

1.5%

Louisiana

B

$6,588

7.5%

-0.7%

California

B

$6,998

8.0%

-0.5%

District of Columbia

B

$7,053

8.1%

0.3%

Montana

B

$7,151

8.2%

1.7%

Idaho

B

$7,162

8.2%

2.0%

New Mexico

B

$7,215

8.3%

-0.1%

Alabama

B

$7,248

8.3%

0.7%

Hawaii

B

$7,432

8.5%

-0.1%

South Carolina

B

$7,541

8.6%

1.8%

Indiana

B

$7,679

8.8%

0.4%

North Carolina

B

$7,779

8.9%

1.4%

Missouri

C

$8,124

9.3%

0.2%

Utah

C

$8,199

9.4%

1.3%

Mississippi

C

$8,437

9.7%

-0.3%

West Virginia

C

$8,447

9.7%

-0.4%

Oklahoma

C

$8,547

9.8%

0.8%

Texas

C

$8,554

9.8%

1.7%

Virginia

C

$8,594

9.8%

0.5%

Kentucky

C

$8,641

9.9%

0.1%

Arkansas

C

$8,767

10.0%

0.7%

Maryland

C

$9,286

10.6%

0.0%

Minnesota

C

$9,446

10.8%

0.2%

Ohio

C

$9,479

10.8%

-0.2%

Georgia

C

$9,517

10.9%

1.0%

Oregon

C

$9,807

11.2%

-0.1%

Maine

C

$10,026

11.5%

1.0%

Pennsylvania

C

$10,198

11.7%

0.1%

Rhode Island

C

$10,240

11.7%

-0.2%

Massachusetts

D

$10,360

11.8%

0.0%

Kansas

D

$10,816

12.4%

0.1%

Michigan

D

$10,920

12.5%

-0.2%

Nebraska

D

$11,085

12.7%

0.2%

Wisconsin

D

$11,198

12.8%

-0.1%

Vermont

D

$11,206

12.8%

0.2%

Iowa

D

$12,084

13.8%

0.2%

New York

D

$12,298

14.1%

-0.8%

New Hampshire

F

$12,539

14.3%

0.4%

New Jersey

F

$12,907

14.8%

-0.1%

Connecticut

F

$13,391

15.3%

0.6%

Illinois

F

$14,778

16.9%

-0.7%

About Doug Milnes, CFA


Doug Milnes, CFA headshot

Doug Milnes is the head of marketing and communications at MoneyGeek. He has spent more than a decade in corporate finance performing valuations for Duff and Phelps and financial planning and analysis for various companies including OpenTable. He holds a master’s degree in Predictive Analytics (Data Science) from Northwestern University and is a CFA charter holder. Doug geeks out on building financial and predictive models and using data to make informed decisions.


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