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

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.)

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 Nevada is the most tax-friendly state in America, followed by North Dakota, Wyoming, Tennessee and Washington. Except for Arizona, states that received a grade of A all share something in common: no state income tax. South Dakota and Texas — which both received a B — also have no state income tax. On average, taxes in the most tax-friendly states only comprised 4% 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 four states to receive an F grade in this analysis — taxes make up an eye-popping 13% of household income.

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

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 sixth most tax-friendly state — saw the highest population growth in the nation at 2.1%. Nevada (No. 1), Tennessee (No.4) and Arizona (No. 8) — also 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 nine states with a D grade, four — New York, Michigan, Oregon and Wisconsin — saw population declines. Other D-grade states (Massachusetts, Kansas, Nebraska, Vermont and New Hampshire) saw no population growth or had growth below the national average.

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 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 E based on the size of the tax payment:

• Grade A: $2,949 to $4,852
• Grade B: $4,853 to $6,757
• Grade C: $6,758 to $8,662
• Grade D: $8,663 to $10,567
• Grade F: $10,568 to $12,472

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.

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.