- Days left

5 least tax-friendly states to live in

During tax season, it seems as if everyone thinks the grass is greener one (or in some instances, two) states over. Wonder whether your own envy is justified? Luckily, the Tax Foundation, a nonpartisan tax research group based in Washington, D.C., crunched some numbers to determine which states are the take the most from residents.

Unlike other "worst of" surveys, the Tax Foundation takes a number of criteria into consideration, including state and local income taxes, property taxes and local sales taxes. Other overviews, such as those based on the Census, may rely solely on state income tax revenue (hence the minor difference in ranking).

Below are the least tax-friendly states, according to the Tax Foundation's results. Worth noting is that the results were calculated based on information made available from the Tax Foundation for 2008, the last tax year for which state income tax data is completely available. Any recent changes, where significant, have been noted.

ALSO SEE: 5 most tax-friendly states to live in!

1. New Jersey. Not only does New Jersey have the worst team record in the NBA this year, they have the worst tax record as well. Taking into consideration state and local property, sales, and income taxes, those in the Garden State pay out a whopping 11.8% in taxes.

It was no surprise, then, that voters booted existing Governor John Corzine (D) out of office last fall in favor of GOP challenger Chris Christie. Voters cited the economy and the state's high tax burden as their biggest concerns -- a particularly timely gripe since taxes in the state had just gone up (again).

New Governor Christie initially received praise for his handling of what was, all agreed, a fairly substantial economic challenge. He cut spending and made some painful decisions on raising taxes to get the state's budget in order. But his "we're all in this together" stance took a beating when he refused to extend the tax rate to top earners.

Hopefully, the tax burden will turn around in the next four years ... or Christie may find himself joining in a revolving door of New Jersey governors.

2. New York. The Empire State just missed the dubious honor of getting the top spot with a total burden of 11.7% -- just 0.1% behind its neighbor, New Jersey. New York is generally regarded as an expensive place to live because of the cost associated with living in New York City, which has a total population of more than many states (about 19 million). But tax woes aren't limited to the city: The state of New York has been struggling to close an estimated $9 billion deficit. That means no tax cuts for residents. In fact, adding to its already high tax burden, New York is likely to see some additional taxes on everyday items shortly -- a tax on soda tops the list.

3. Connecticut. Connecticut has the advantage of being a fairly wealthy state, which means pretty good roads and schools, among other perks. The Constitution State reaps those funds from high-earning taxpayers, many of whom work in New York but want to live in a more suburban atmosphere. Unfortunately, suburbia doesn't come cheap. While Connecticut's state income tax is fairly average, the state more than makes up for it in high property taxes. Excise taxes on gas and cigarettes also figure in at the top. And of course, if you have rich taxpayers in your state, you'll want to tax them coming and going: Connecticut imposes an estate -- and gift -- tax.

4. Maryland. Maryland's struggle to balance its budget has been well documented over the past year, with emphasis on the consequences of its infamous "millionaire's tax." More so than other states that have implemented such a tax, Maryland is rumored to be losing taxpayers as a result of rising taxes. According to the data, one in eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Despite the disappearing acts of its millionaires, Maryland will likely keep its surtaxes for the wealthy. The bigger question is whether it will keep its residents.

5. Hawaii. If there was an award for complicated tax systems, Hawaii would likely take the honor. The Aloha State's incredibly complex, tiered system consists of 12 brackets with a top rate of 11% kicking in at $200,000 for individual taxpayers ($400,000 for married taxpayers filing jointly). This makes Hawaii's state income tax rate the highest in the nation. Usually having a high top tax rate isn't enough to tip you into a top tax burden spot -- unless a significant portion of your taxpayers happen to be at the top to begin with ... and that's what has happened to Hawaiian taxpayers. An amazing 6.4% of Hawaii's households, or 28,363, are classed as millionaires, down from 2008 but still the highest proportion of millionaires of any state for the second year in a row.

Hawaiians also bear a relatively high burden when it comes to real estate taxes. But gosh, I'll bet those views are worth it.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Intro to Retirement

Get started early planning for your long term future.

View Course »

TurboTax Articles

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

Tax Tips for Uber, Lyft, Sidecar and other Car Sharing Drivers

When you're a driver for a ride-sharing company such as Uber, Lyft, Sidecar, or other car sharing service, the most important thing to understand about your taxes is that you are probably not an employee of Uber, Lyft or Sidecar. Drivers for these companies are usually independent contractors, a fact that has tax implications, both at filing time and year-round.

Add a Comment

*0 / 3000 Character Maximum