Tax season has arrived, and both individual taxpayers and couples filing jointly are pulling together all the documents they need to prepare their returns.
But how much will you end up paying in state and federal taxes? Whether you can keep more cash in your wallet depends partially on where you live and how you are filing.
Recently, FinanceBuzz analyzed data from the U.S. Census Bureau and combined it with federal and state tax rates to calculate the tax burden residents face in each state as a percentage of median annual income.
Here are the states with the highest and lowest rates for individual taxpayers, followed by the rankings for couples filing jointly.
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1. Massachusetts: 23.67%
If you hope to retire early, Massachusetts won’t make it easy on your efforts to build a nest egg. The Bay State leads all U.S. states with the highest tax burden for individual taxpayers.
According to the Pew Charitable Trusts, the state relies heavily on state income tax, with 56.1% of its revenue in fiscal year 2022 coming from the tax. That puts it behind only Oregon and New York.
2. Oregon: 23.37%
Oregon relies heavily on its personal income tax to generate revenue for the state.
Pew says 62.3% of the state’s income comes from taxes on personal income. On the other hand, it’s one of five states with no sales tax.
3. Connecticut: 23.19%
In addition to its high income tax rate, Connecticut is also not tax-friendly for retirees.
The state partially taxes Social Security income and fully taxes withdrawals from retirement accounts.
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4. Hawaii: 22.79%
In addition to high taxes, Hawaii also has the highest cost of living among U.S. states, according to the Missouri Economic Research and Information Center.
The state’s remote location and reliance on imported goods pushes costs higher for residents.
5. Maryland: 22.58%
Those filing as individuals in Maryland face a high tax burden. However, there is a silver lining for some retirees worried about taxes.
The state doesn’t tax Social Security income and only partially taxes retirement fund withdrawals and public pension income. On the other hand, private pension income is fully taxed.
States with the lowest tax burdens
While tax burdens are sky-high in some states, others give taxpayers a big break. Here are the places where individual taxpayers pay the least in taxes.
1. Florida: 15.75%
Florida has the lowest tax burden for individual filers among all the states. In fact, it's one of nine states that has no tax on income whatsoever.
However, not every tax in Florida is low. Florida’s property tax burden is higher than that of states such as Maryland and Hawaii, according to Wallethub. Those two states have much higher taxes on income.
2. Tennessee: 15.77%
Tennessee also has no state income tax. However, watch out for the state’s sales taxes. General sales taxes in the Volunteer State account for 56.9% of the state’s revenue.
3. Nevada: 15.78%
Nevada has no state income tax and looks to other sources for its revenue. For example, the state relies on taxes from gambling and a high sales tax for revenue.
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4. South Dakota: 15.78%
South Dakota also has no state income tax. But shoppers need to watch their wallets in the Mount Rushmore State.
A large share of the state’s tax revenues comes from sales taxes — 61.6% — which could make it a costlier place to live if you are a spendthrift.
5. Texas: 15.99%
Texas rounds out the list of states with low tax burdens that are largely due to not having an income tax.
Texas relies heavily on sales tax instead, with 59.4% of the state’s revenue coming from sales taxes, according to Pew.
Tax burden for couples
Taxes for couples who file jointly are calculated differently than taxes for individuals.
Here are the top five most expensive states and their rates for couples filing jointly:
- Massachusetts: 23.49%
- Hawaii: 23.34%
- Connecticut: 23.17%
- Maryland: 22.83%
- Oregon: 22.57
Here are the top five least expensive states and their rates for couples filing jointly:
- Tennessee: 15.55%
- Florida: 15.64%
- Wyoming: 15.66%
- Nevada: 15.73%
- South Dakota: 15.77%
Living in a place with low taxes is a key advantage if you want to build wealth. So, it’s important to consider tax rates when deciding where to settle down.
You can save money living in a state with low income taxes, but you will also want to factor in sales or other types of taxes.
Also, remember that tax laws can vary from state to state in terms of how much retirement income — including income from 401(k) plans and IRAs, Social Security, and pensions — is subject to taxes.