21 States With the Lowest Taxes, Ranked
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There are lots of factors to consider when choosing a place to live, and taxes are definitely one of them. Whether you're thinking of moving or just want to know where your state ranks, this list highlights the 21 states with the lowest overall tax burdens.
While you might expect states with no sales or personal income taxes to have lower tax burdens overall, that isn’t always the case. If a state government doesn’t collect tax in one form, they often have to compensate by collecting revenue in a different way — say, through higher excise taxes on goods such as beer, gasoline or cigarettes, or through higher property taxes. In other words, you might wind up paying more tax in less obvious ways.
The good news is that many states don’t levy estate and inheritance taxes and offer tax exemptions for seniors, disabled people and veterans. Some mineral- or resource-rich states are also able to pass much of the tax burden to corporations rather than individuals by taxing business gross receipts or through lease fees. In Alaska, for example, the state even pays each resident annually from an oil royalties fund.
With all of this in mind, here are the states with the lowest taxes, ranked from highest to lowest.
19. Arizona (Tie)
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Individual income tax: 1.43%
Property tax: 2.53%
Sales and excise tax: 4.23%
Total tax burden: 8.19%
* All tax data comes from WalletHub’s 2021 report.
Why Arizona Has One of the Lowest Tax Rates
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The first three states on the list are tied in the 19th spot with a total tax burden of 8.19 percent. Interestingly enough, all three have sales tax rates in the top 10, but their income and property taxes help lower the burden significantly for residents.
Arizona has the 10th lowest income tax across the U.S., while its property tax rates come in at No. 34 compared to the other 50 states.
19. New Mexico (Tie)
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Individual income tax: 1.44%
Property tax: 2%
Sales and excise tax: 4.75%
Total tax burden: 8.19%
Why New Mexico Has One of the Lowest Tax Rates
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New Mexico’s property tax rates are low, and the state doesn’t levy estate or inheritance taxes. New Mexico also has a progressive tiered personal income tax that starts at around 1.44 percent and goes up to a top rate of 5.9 percent.
Yes, the state taxes Social Security benefits and all forms of retirement income. But seniors over 65 are able to claim both the standard personal exemption and additional ones, especially if they’re on lower incomes. Low-income seniors are also eligible for exemptions on property tax.
While New Mexico has a higher rate when it comes to sales tax, groceries and prescription drugs are exempt.
19. Texas (Tie)
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Individual income tax: 0%
Property tax: 3.91%
Sales and excise tax: 4.28%
Total tax burden: 8.19%
Why Texas Has One of the Lowest Tax Rates
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Texas is one of the few states that doesn’t levy personal income tax. The state also doesn’t have estate or inheritance taxes.
Texas property tax higher compared to other states, but Texas grants residents a number of exemptions, including one for a primary residence home. Residents who are 65 or older or disabled, or homeowners with wind or solar devices on their property, can claim additional exemptions. Disabled veterans are exempt from paying any property tax.
Its sales taxes are also higher than most states, but groceries, prescription and nonprescription drugs are all exempt from sales tax. Plus, Texas gasoline, spirits and wine excise taxes are among the lowest in the country.
18. Indiana
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Individual income tax: 2.05%
Property tax: 2.19%
Sales and excise tax: 3.91%
Total tax burden: 8.15%
Why Indiana Has One of the Lowest Tax Rates
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Indiana has a flat personal income tax rate, which is on the low side for US states. However, the amounts of standard personal exemptions allowed for a taxpayer are also relatively low, starting at $1,000 and going up to a maximum of $2,500 for dependents. Indiana doesn’t levy estate or inheritance taxes, and the state's property tax rate is roughly the national average, if not on the low side.
As for the sales tax rates, residents will be happy to know that there are no additional local taxes added on goods or services. Groceries and prescription drugs are also exempt from sales tax.
17. North Carolina
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Individual income tax: 2.63%
Property tax: 2.15%
Sales and excise tax: 3.29%
Total tax burden: 8.07%
Why North Carolina Has One of the Lowest Tax Rates
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North Carolina has a flat personal income tax rate and offers residents the same standard deductions as the federal government, significantly higher than most state deductions. The state tax rate is being progressively reduced.
North Carolina’s property tax rate is well below the national average. While the state excise tax on cigarettes is one of the lowest in the country, wine is taxed at roughly the national average, motor fuel tax is high, and spirits and beer excise taxes are among the highest in the country.
16. Georgia
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Individual income tax: 2.38%
Property tax: 2.59%
Sales and excise tax: 2.94%
Total tax burden: 7.91%
Why Georgia Has One of the Lowest Tax Rates
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Georgia doesn’t tax Social Security payments and allows an exemption of up to $65,000 on retirement income. The state doesn’t levy estate or inheritance taxes either.
While Georgia’s progressive tiered personal income tax rate starts at just 1 percent, most residents pay the top tax rate of 5.75 percent. Georgia’s property tax is below the national average, and the state offers an exemption to residents on part of the value of a primary residence. Low-income seniors over 65 are eligible for a double-exemption.
Like many other states on this list, groceries are exempt from state sales tax in Georgia.
15. Idaho
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Individual income tax: 2.38%
Property tax: 2.32%
Sales and excise tax: 3.18%
Total tax burden: 7.88%
Why Idaho Has One of the Lowest Tax Rates
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Idaho doesn’t tax Social Security payments, and public pensions qualify for deductions for residents over 65 or disabled residents over 62. The state doesn’t charge estate or inheritance taxes. Idaho property tax rates are well below the U.S. average, and the state offers a property tax reduction for low-income seniors over 65.
However, Idaho’s progressive tiered personal income tax ranges as high as 6.93 percent. Income tax is levied on non-Social Security retirement income, including IRAs and 401K accounts. The state has high spirit excise taxes and charges sales tax on groceries.
14. Virginia
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Individual income tax: 2.87%
Property tax: 2.93%
Sales and excise tax: 2.06%
Total tax burden: 7.86%
Why Virginia Has One of the Lowest Tax Rates
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Virginia ranks in the 10 least expensive states in the country for sales tax. While Virginia does charge excise tax on motor fuels, cigarettes and alcohol, they’re also relatively low compared to other states. The state also doesn’t levy estate or inheritance taxes.
That said, Virginia is another state with a progressive tiered tax structure on personal income that starts at 2 percent and reaches a top of 5.75 percent, which is relatively high.
13. North Dakota
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Individual income tax: 0.87%
Property tax: 2.97%
Sales and excise tax: 3.97%
Total tax burden: 7.81%
Why North Dakota Has One of the Lowest Tax Rates
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North Dakota has one of the lowest progressive personal income tax rates in the country and is capped at 2.9 percent. The tax system has five separate tiers. In addition, North Dakota doesn’t levy estate taxes.
Food and prescription drugs are exempt from sales tax in North Dakota. And even though North Dakota does charge excise tax on items such as motor fuels, cigarettes and alcohol, the rates are among the lowest in the country.
12. Missouri
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Individual income tax: 2.37%
Property tax: 2.25%
Sales and excise tax: 3.13%
Total tax burden: 7.75%
Why Missouri Has One of the Lowest Tax Rates
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Missouri has a progressive personal income tax that is tiered from 0 percent for low income earners up to to a maximum of 5.4 percent. Missouri allows state taxpayers to claim the same relatively higher federal standard deductions on their state tax filing. Residents who are over 65, blind or disabled are eligible for extra deductions, and the state doesn’t charge estate taxes. Plus, Missouri’s excise taxes on cigarettes and gasoline are among the lowest in the country.
Missouri property taxes are among the lowest in the country, ranking No. 39 out of the 50 states.
9. Alabama (Tie)
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Individual income tax: 1.96%
Property tax: 1.41%
Sales and excise tax: 4.08%
Total tax burden: 7.45%
Why Alabama Has One of the Lowest Tax Rates
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Alabama has a progressive tiered personal income tax system, starting at about 2 percent and going up to a maximum of 5 percent. Alabama doesn’t tax Social Security payments or most government pension funds. However, the state does tax payments from private IRA and 401K funds. Alabama doesn’t levy estate and inheritance taxes.
Alabama has the lowest property tax rate in the country. Low-income and disabled residents don’t pay any property tax on their principal dwelling, while senior residents over 65 don’t pay the state portion of property tax and receive an exemption on county taxes.
Despite having relatively low levels of income tax and property tax, Alabama has relatively high sales tax. The state tax is around 4 percent, but local municipalities can charge as much as 7.5 percent tax.
9. Montana (Tie)
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Individual income tax: 2.58%
Property tax: 3.59%
Sales and excise tax: 1.28%
Total tax burden: 7.45%
Why Montana Has One of the Lowest Tax Rates
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Montana allows federal income taxes to be deducted on state returns and gives a tax credit on 2 percent of all capital gains. The state doesn’t have estate or inheritance taxes, and residents over the age of 62 can qualify for a property tax relief program, which includes renters as well as owners.
Montana doesn’t have a state sales tax, choosing instead to levy excise taxes on items such as gasoline, alcohol, tobacco and hotel rooms. Food and both prescription and non-prescription drugs aren’t taxed.
Montana makes most of its revenue from personal income taxes, from taxing business gross receipts and through licensing fees.
9. South Carolina (Tie)
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Individual income tax: 1.99%
Property tax: 2.77%
Sales and excise tax: 2.69%
Total tax burden: 7.45%
Why South Carolina Has One of the Lowest Tax Rates
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South Carolina has a tiered personal income tax rate on eligible income that goes up to a maximum of 7 percent. Like other states on this last, South Carolina has no inheritance or estate tax either.
The state also offers a range of tax benefits for seniors and veterans. Social Security payments are exempt from taxation. Seniors over 65 can claim exemptions for up to $10,000 of retirement income and up to $15,000 of other income. Retired veterans over 65 can exclude up to $30,000 of their military pension from being taxed.
8. South Dakota
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Individual income tax: 0%
Property tax: 3.02%
Sales and excise tax: 4.35%
Total tax burden: 7.37%
Why South Dakota Has One of the Lowest Tax Rates
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South Dakota doesn’t levy any personal income taxes, and this includes interest and dividend payments. There is no inheritance or estate tax in the state.
While South Dakota does tax food sales, exemptions are made for prescription drugs, food stamp purchases and water bought in bulk or through a water supply system. Many services are also exempt from tax, including medical, banking, social, agricultural and educational services.
The state makes up revenue by charging a higher sales tax and through a relatively high property tax rate.
7. Oklahoma
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Individual income tax: 1.92%
Property tax: 1.67%
Sales and excise tax: 3.54%
Total tax burden: 7.13%
Why Oklahoma Has One of the Lowest Tax Rates
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Oklahoma has a six-tier progressive personal income tax with a top rate of 5 percent. The total amount of tax paid by individuals as a percentage of income is one of the lowest in the country. Oklahoma’s personal income and excise tax rates are moderate to low, and property taxes are also relatively low, which helps keep the overall tax burden on residents lower.
In order to raise revenue, the state government relies heavily on sales tax. Oklahoma also taxes groceries and collects excise tax on such goods as fuel, alcohol and cigarettes.
6. Florida
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Individual income tax: 0%
Property tax: 2.74%
Sales and excise tax: 4.23%
Total tax burden: 6.97%
Why Florida Has One of the Lowest Tax Rates
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The state of Florida doesn’t levy personal income, estate, inheritance or investment taxes. This means that the state relies heavily on sales and excise taxes, even including internet purchases or goods bought outside Florida but delivered in-state. Groceries and medicines are exempt from tax, but excise taxes are charged on fuels, tobacco products, communications services and more.
While the state of Florida doesn’t levy property taxes, local state municipalities do and receive most of their revenue this way. These local property taxes are some of the highest in the country. However, Florida residents who count their home as a primary residence or are senior citizens, widowed, blind, disabled or veterans can qualify for exemptions.
5. New Hampshire
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Individual income tax: 0.13%
Property tax: 5.47%
Sales and excise tax: 1.24%
Total tax burden: 6.84%
Why New Hampshire Has One of the Lowest Tax Rates
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New Hampshire doesn’t have much of a sales tax. The state also doesn’t charge any personal income tax on earned income, and only 5 percent on interest and dividends that exceed $2,400 per person. This is a much lower rate than most other U.S. states. State residents who are over 65, blind, disabled or unable to work receive a $1,200 exemption on dividend and interest income.
New Hampshire receives much of its state revenue from excise taxes, so consumers do pay tax on cigarettes, beer and gasoline. The state also taxes electricity use, communication services, hotel rooms and restaurant meals. It has a timber tax, too, and charges 10 percent of the stumpage price after trees are cut.
With low sales and income taxes, the state has to tax somewhere. So, it has the highest property tax rate in the country and uses the income to fund state schools and parks.
4. Delaware
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Individual income tax: 3.25%
Property tax: 1.77%
Sales and excise tax: 1.19%
Total tax burden: 6.21%
Why Delaware Has One of the Lowest Tax Rates
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Delaware doesn’t levy state or local taxes to consumers. Instead, the state charges most businesses tax on their total gross receipts. Delaware’s excise taxes, on such goods as gasoline, alcohol and cigarettes, are in the bottom one-third of states. Estate tax in Delaware is only charged on estates valued at over $5.45 million, which means that most heirs don’t have to pay any estate or inheritance taxes.
Delaware has a progressive personal income tax, ranging from 0% for low-income residents and going up to 6.6% for taxable income over $60,000. The state doesn’t tax Social Security payments as personal income, and the first $2,000 of other retirement income is exempt.
Property taxes are among the lowest in the country and eligible seniors qualify for a school property tax credit.
3. Wyoming
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Individual income tax: 0%
Property tax: 3.33%
Sales and excise tax: 2.81%
Total tax burden: 6.14%
Why Wyoming Has One of the Lowest Tax Rates
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Wyoming is considered one of the most tax-friendly states in the country. The state doesn’t tax gasoline or food sales, and it doesn’t charge personal or corporate income taxes. Any retirement income earned outside the state is also tax-free. Wyoming doesn’t charge tax on real estate sales or mineral ownership.
State residents can gift real estate holdings to their heirs without paying a gift tax, and there are no state inheritance or estate taxes. Wyoming offers residents the ability to use a dynasty trust to avoid paying federal estate taxes on real estate holdings. Holdings are transferred to a limited liability company or family partnership and then put into a dynasty trust, which is valid for up to a thousand years. Family descendents can continue to use or benefit from properties without having to pay state or federal estate taxes.
2. Tennessee
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Individual income tax: 0.08%
Property tax: 1.70%
Sales and excise tax: 3.96%
Total tax burden: 5.74%
Why Tennessee Has One of the Lowest Tax Rates
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Tennessee is also considered a low-tax state. The state doesn’t charge personal income tax and only taxes 1 to 2 percent on income from interests and dividends. This makes Tennessee attractive to retired people, as Social Security payments and income from retirement accounts aren’t subject to state tax and property tax rates are fairly low. In addition, Tennessee provides property tax relief to low-income retirees and disabled homeowners. The state also doesn’t charge estate or inheritance taxes.
However, Tennessee does charge tax on groceries, one of the few states to do so, and has one of the highest state sales tax levels in the country. While Tennessee residents don’t pay tax on prescription drugs, they do pay excise tax on groceries, gasoline and cigarettes.
1. Alaska
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Individual income tax: 0%
Property tax: 3.68%
Sales and excise tax: 1.42%
Total tax burden: 5.10%
Why Alaska Has One of the Lowest Tax Rates
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Meet the state with the lowest individual tax burden in the country. This is largely due to the fact that Alaska doesn’t levy state sales tax or personal income tax.
Only 24 municipalities in the entire state charge property tax, as many of the 321 communities across the state are still unincorporated. In addition, Alaska doesn’t charge property tax on the first $150,000 of assessed home value for people over 65 and disabled veterans.
Only 107 municipalities collect a local tax, and these tax rates range from 1 to 7 percent. Alaska also charges the lowest gasoline tax in the country. The state relies on oil and gasoline revenues to make up for lower tax income. In addition, Alaska’s Permanent Fund Dividend, drawn from oil royalties, pays each state resident roughly $1,600 per year to offset expenses.