Ranked: 15 US States with the Lowest Income Taxes

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It’s a fact that states that charge the least on resident income are an excellent place to settle down. In descending order, here are the 15 states in the US with the lowest income taxes. Some of them collect a flat rate on earnings, charging the same percentage regardless of your level, while more than half don’t impose any income tax.

15. Michigan – 4.75%

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Michigan implements a flat income tax rate of 4.75%, meaning all residents are subject to the same rate, irrespective of their earnings. Michigan introduced this direct system in 1967, increasing steadily to 4.05% in 2023 generating about $6.7 billion yearly.

14. Colorado – 4.4%

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Colorado also uses a flat rate of 4.40%, ensuring that all residents pay the same rate regardless of income. It falls roughly in the middle among the eight states using this tax system. It also offers the Colorado Earned Income Tax Credit, providing financial relief to lower-income individuals.

13. Ohio – 2.765% to 3.99%

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Ohio’s individual income tax rate is graded, ranging from 2.765% to 3.99%. The state has four brackets with rates of 0%, 2.75%, 3.68%, and 3.75%, depending on residency status and taxable income. Residents who earn $26,050 are charged 0%, while those who make $100,000 pay 3.75%.

12. Indiana – 3.15%

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Indiana maintains a flat 3.15% individual income tax rate, steadily decreasing from 3.4% in 2015. The most recent cut,  initiated in 2022 and accelerated in 2023, will progressively reduce charges from 3.23% to 2.9% over the next four years.

11. Pennsylvania – 3.07%

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Unlike progressive systems, whose rates increase as income rises, a flat tax applies a singular percentage to all levels. In Pennsylvania, it is 3.07%, the lowest flat rate in the US. Therefore, regardless of your income level, you’ll pay the state 3.07% of your taxable earnings.

10. North Dakota – 1.1% to 2.9%

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Although North Dakota imposes an income tax, its relatively modest rate of 2.9% ranks it the 10th lowest in the nation. The state also charges 1.41% to 4.31% on corporate earnings, making it an appealing option for individuals seeking a reduced tax burden.

9. Washington – No Income Tax

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Washington is recognized as a state with low-income taxes, complemented by a relatively modest duty on property and the absence of a sales tax. It doesn’t receive charges on wages, only imposing a meager 7% on capital gains. Together, these factors combine to make Washington a favorable choice for residents.

8. New Hampshire – No Income Tax

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New Hampshire refrains from taxing wages but applies a 4% duty on dividends and interest income, with a top marginal charge of 5%. It exclusively takes percentages on interest and dividends, so it stands out for having no sales or general excise tax.

7. Nevada – No Income Tax

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Whether employed or retired, Nevada residents are exempt from remitting percentages on their income. Likewise, the state charges on gross receipts, and the average combined state and local sales tax rate is 8.23%.

6. Alaska – No Income Tax

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Alaska is considered to be among the most tax-friendly states in the US. In addition to exempting residents from charges on their earnings, the corporate income tax rate ranges from 2.0% to 9.40%, and there is a meager 1.76% duty on sales.

5. Florida – No Income Tax

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Florida is one of seven states in the US without an income tax, contributing to its low tax burden. Residents are still required to remit federal income charges, even though the state constitution forbids duty on earnings. Its sales rate is also relatively low, with an average of about 6%.

4. South Dakota – No Income Tax

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Like many states with no income tax, South Dakota generates revenue through other forms of taxation, including cigarettes and alcohol. The state doesn’t charge individual or corporate earnings and has an average combined state and local sales rate of 6.40%. Also, the cost of living here is about 2% lower than the national average.

3. Tennessee – No Income Tax

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Tennessee is an excellent place for people who want to keep their tax bill low because it charges as low as 0% on earnings and has a reasonable duty on sales. The state uses a graduated income tax, which means people who earn more pay a higher rate.

2. Texas – No Income Tax

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Like Florida, Texas has no personal income tax, mainly because of its robust economy and welcoming business environment. The state makes up for this absence with a combined state and local sales tax rate of 8.20%.

1. Wyoming – No Income Tax

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Wyoming has no income tax; however, it has a high sales tax rate of 5.34%. With no corporate or personal income charges, state and local governments rely heavily on mineral revenues to generate revenue. Hence, the cost of living in Wyoming is about 4% lower than the national average because it is the most tax-friendly state in the US.

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