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.
|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|
|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|
|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|
- 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.