State Taxes

This page will host income tax forms from a growing number (up to all) of the U.S. states, based on assumptions about a reasonable income level that might be experienced in Jailbreak. The impetus for this page was a discussion over at Our Next Life (here) and the preponderance of focus in the community on federal taxes, but not much on state taxes. The goal is to provide a reference for how to think about state personal income taxes, and a rule-of-thumb ranking of states based on this metric alone.

For purposes of the calculation, I assumed the following income, because it should yield a middle-income lifestyle and that should resonate with many looking to Jailbreak:

  • Ordinary dividends: $20,000, of which 80% ($16,000) are qualified dividends
  • Taxable interest: $3,500
  • Tax-exempt interest: $1,500
  • Capital gains on sale of stock: $12,000

For the most part, states don’t care where the money came from (it’s all just income), so the total income here is $37,000. This should give a $50,000 lifestyle if the capital gains come from sale of stock whose value has roughly doubled since purchase.

As far as details go, I used the married-filing-jointly status, with one child, because that’s me. I didn’t account for any situation-specific tax credits in any state, because I don’t qualify for any and that would just muddle the comparison. Your mileage may vary.

For a similar ranking of states, but for roughly double the income, see State of Confusion: Does Location Matter for Retirement Taxes?

I’ll be adding states to this list as time goes on, in the order in which I find them interesting. They are sorted by tax liability.

State Tax Liability  Notes
Federal $0 Thanks to the 0% tax rate on qualified dividends for low-income earners
Alaska N/A No personal income tax
Florida N/A No personal income tax
Nevada N/A No personal income tax
South Dakota N/A No personal income tax
Texas N/A No personal income tax
Washington N/A No personal income tax
Wyoming N/A No personal income tax
California $0 Progressive with fairly large personal and child credits
New Mexico $108
Maine $130 Generous deductions and exemptions but high rate (starting at 5.8%)
Connecticut $254 Generous deductions and exemptions for joint filers; could be up to $200 lower with a property tax credit, if a homeowner
Vermont $352 Low rate (3.5%) with all federal deductions/exemptions.
Rhode Island $355 Generous deductions and exemptions and low rate
South Carolina $385 Relatively low rates on Federal taxable income, so Federal deductions/exemptions apply
Arizona $394 Low rates and good deductions/exemptions
Idaho $468 Same deductions and exemptions as federal and quick ramp to 6%+ rate
Colorado $567 Flat tax on Federal taxable income without state-specific credits
New Jersey $581 See notes
Utah $667
Montana $755 Decent deductions but rates start at 5%; some preferable treatment of capital gains
New York $771 Moderate deductions and moderate rates
Louisiana $785 Moderate deductions and moderate rates
Mississippi $795 Moderate ramp up the brackets and good exemptions
Delaware $978 Relatively small deductions and exemptions
New Hampshire $1,010 Flat 5% on dividends and interest (not capital gains or W-2 income)
Tennessee $1,125 Same rules as New Hampshire, but smaller exemption; rates will go down 1% per year until 2021, when the tax will go away
North Carolina $1,068 Flat tax (5.75%) with pretty decent standard deduction (and child tax credit)
Pennsylvania $1,136 Low-rate (3%) flat tax with no deductions or exemptions
Georgia $1,159 Such a steep ramp in rates (max 6% by $7,000 income) makes Georgia effectively a flat-tax state
West Virginia $1,170 No deductions and small exemptions
Virginia $1,365 Modest deductions and fast jump to 5%+ rate
Hawaii $1,389 Very low deductions and exemptions and fast ramp to ~7% marginal rates
Alabama $1,398 Fast ramp up the brackets makes this almost a 5% flat tax; modest deduction/exemption
Maryland $1,470 See notes; could be as high as $1,809 based on locality.
Kentucky $1,817 Laughably low deductions and exemptions and a marriage penalty. A somewhat better result can be gotten by filing separately.
Oregon $1,882 Small deductions and credits and very high rates (9% after $8,000)
Massachusetts $1,887 Generous deductions and exemptions DO NOT APPLY to interest, dividends, or capital gains

Notes

  • If interest income is from U.S. federal obligations (Treasuries) it is not taxable as income by the states. In the above, I did not take that into account. But say, for example, that the $3,500 of interest income above is from a total-bond-market fund, such as the popular Barclay’s Aggregate…in that case, something like 30%–40% of the interest is from Treasuries and the taxable income in each state would be lower by about $1,000. This would have an almost unnoticeable effect in the high-tax states but would make a very measurable difference in the low-tax states.
  • New Jersey is easily the most infuriating state yet, if only because even getting the tax forms from the official source requires installing Adobe Acrobat. Since I refused to do that, I got it from a third-party source. Although I don’t guarantee any of the numbers here, I really don’t guarantee New Jersey’s. On a practical note, New Jersey allows the deduction of property tax, or if a renter, 18% of rent. For someone renting a place at about $1,000/month, that will reduce the taxes by about $50. This isn’t included in the table, though, because the actual amount will be very situation-specific.
  • Maryland collects local tax as well as statewide tax through its state tax forms. I used the lowest local rate in calculating the number in the table. Using the highest local rate, the tax could be as great as $1,809.