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

Updated: October 31, 2024

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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.)

CORRECTION NOTICE

The original tax amounts for each state in our story about the tax-friendliest states were calculated using incorrect data. As a result, the rankings were inaccurate. We apologize for any confusion this may have caused and have since corrected and updated the data as of May 14, 2024.

KEY FINDINGS

Wyoming is the most tax-friendly state, where residents pay $2,877 annually. Illinois is the least tax-friendly state; there, families pay $12,916 in annual taxes.
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 $10,040 per year.
States that received an A in tax-friendliness experienced above-average population growth (1%); states with an F saw a decline (-0.8%).
Florida, which received an A and ranked as the No. 4 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 an F and ranked as the second-worst state for tax burdens, saw the biggest population decline (-0.8%) 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 ($94,003) and owning a home valued at the national median ($320,900).

MoneyGeek’s analysis found that Wyoming is the most tax-friendly state in America, followed by Nevada, Tennessee, Florida and Alaska. Except for Arizona, states that received a grade of A all share something in common: no state income tax. Texas — which received a B — also has no state income tax. On average, taxes in the most tax-friendly states only comprised 5% of the typical household’s income.

On the other hand, taxes made up 11% 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 one of two states to receive an F grade in this analysis — taxes make up an eye-popping 13% of household income.

Notably, all of the 10 least tax-friendly states are located in either the Northeast or the Midwest.

The 10 States With the Lowest Tax Burden

	State	Grade	Tax as % of Income
1.	Wyoming	A	3.3%
2.	Nevada	A	4.3%
3.	Tennessee	A	4.3%
4.	Florida	A	5.0%
5.	Alaska	A	4.3%
6.	Washington	A	6.5%
7.	South Dakota	A	4.5%
8.	North Dakota	A	4.4%
9.	Arizona	A	5.8%
10.	Montana	B	6.1%

The 10 States With the Highest Tax Burden

	State	Grade	Tax as % of Income
1.	Illinois	F	13.0%
2.	New York	F	13.7%
3.	Connecticut	D	11.7%
4.	New Jersey	D	13.5%
5.	Iowa	D	9.7%
6.	Kansas	D	9.6%
7.	Nebraska	D	9.2%
8.	Massachusetts	D	12.0%
9.	Michigan	D	9.4%
10.	Vermont	D	10.1%

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 fourth most tax-friendly state — saw the highest population growth in the nation at 2.1%. Nevada (No. 2), Tennessee (No.3) and Arizona (No. 9) — also A-graded states — also saw above-average growth at 1.1% each.

Both of the two states with an F grade had population declines in 2022. Among the ten states with a D grade, four — New Jersey, Michigan, Oregon and Wisconsin — saw population declines. Other D-grade states (Massachusetts, Iowa, Kansas, Nebraska and Vermont) saw no population growth or had growth below the national average.

Methodology

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

Using expenditure and income data from the Bureau of Labor Statistics’ Consumer Expenditure Survey and income and housing data from the U.S. Census Bureau, MoneyGeek constructed a hypothetical family with one dependent, a gross income of $94,003 (the national median income at the time of research), a home worth $320,900 (the median home price at the time of research) and annual taxable purchases of $22,203.

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 F based on the size of the tax payment:

Grade A: $2,877 to $4,884
Grade B: $4,885 to $6,891
Grade C: $6,892 to $8,899
Grade D: $8,900 to $10,907
Grade F: $10,908 to $12,916

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 via email to press@moneygeek.com.

Full Dataset

The data points presented are defined as follows:

Grade: Based on the size of overall 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 $94,003, a home valued at $320,900 and annual taxable purchases of $22,203. 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.

Rank	State	Grade	Estimated Taxes	Tax as % of Median Income	Change in Population 2022
1	Wyoming	A	$2,877	3.3%	0.4%
2	Nevada	A	$3,171	4.3%	1.1%
3	Tennessee	A	$3,771	4.3%	1.1%
4	Florida	A	$3,846	5.0%	2.1%
5	Alaska	A	$3,921	4.3%	0.1%
6	Washington	A	$4,412	6.5%	0.6%
7	South Dakota	A	$4,582	4.5%	1.6%
8	North Dakota	A	$4,652	4.4%	0.6%
9	Arizona	A	$4,819	5.8%	1.1%
10	Montana	B	$4,929	6.1%	1.7%
11	Colorado	B	$6,134	7.4%	0.5%
12	Delaware	B	$6,403	7.0%	1.5%
13	California	B	$6,406	9.7%	-0.5%
14	Texas	B	$6,495	7.2%	1.7%
15	South Carolina	B	$6,502	7.0%	1.8%
16	Idaho	B	$6,571	8.0%	2.0%
17	Louisiana	B	$6,579	6.9%	-0.7%
18	New Mexico	B	$6,586	7.1%	-0.1%
19	North Carolina	B	$6,660	7.3%	1.4%
20	Indiana	B	$6,778	6.8%	0.4%
21	Missouri	C	$6,933	7.0%	0.2%
22	Alabama	C	$7,075	7.3%	0.7%
23	District of Columbia	C	$7,097	8.6%	0.3%
24	Arkansas	C	$7,161	7.3%	0.7%
25	Kentucky	C	$7,220	7.3%	0.1%
26	Utah	C	$7,370	9.1%	1.3%
27	West Virginia	C	$7,453	7.4%	-0.4%
28	Mississippi	C	$7,579	7.6%	-0.3%
29	Ohio	C	$7,743	7.4%	-0.2%
30	Hawaii	C	$7,851	9.8%	-0.1%
31	Virginia	C	$7,856	8.8%	0.5%
32	New Hampshire	C	$7,999	9.5%	0.4%
33	Oklahoma	C	$8,018	8.1%	0.8%
34	Rhode Island	C	$8,237	9.8%	-0.2%
35	Maine	C	$8,287	9.2%	1.0%
36	Pennsylvania	C	$8,408	8.6%	0.1%
37	Maryland	C	$8,545	9.6%	0.0%
38	Minnesota	C	$8,663	9.3%	0.2%
39	Georgia	C	$8,716	9.6%	1.0%
40	Wisconsin	D	$8,940	9.2%	-0.1%
41	Oregon	D	$9,008	11.4%	-0.1%
42	Vermont	D	$9,185	10.1%	0.2%
43	Michigan	D	$9,336	9.4%	-0.2%
44	Massachusetts	D	$9,355	12.0%	0.0%
45	Nebraska	D	$9,360	9.2%	0.2%
46	Kansas	D	$9,990	9.6%	0.1%
47	Iowa	D	$10,447	9.7%	0.2%
48	New Jersey	D	$10,701	13.5%	-0.1%
49	Connecticut	D	$10,783	11.7%	0.6%
50	New York	F	$10,948	13.7%	-0.8%
51	Illinois	F	$12,916	13.0%	-0.7%

About Doug Milnes, CFA

Doug Milnes is a CFA charter holder with over 10 years of experience in corporate finance and the Head of Credit Cards at MoneyGeek. Formerly, he performed valuations for Duff and Phelps and financial planning and analysis for various companies. His analysis has been cited by U.S. News and World Report, The Hill, the Los Angeles Times, The New York Times and many other outlets.

Milnes holds a master’s degree in data science from Northwestern University. He geeks out on helping people feel on top of their credit card use, from managing debt to optimizing rewards.

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