Paying taxes are unavoidable no matter what state you go to in America. The Tax Foundation, stated that the average income tax rate in the US is 18.1%. It’s much lower compared to the highest marginal rate that is paid by many year-round employees. The average taxpayer, is also paying taxes through daily purchases, real estate as well as local and state taxes which can be just as annoying as federal income taxes.
SmartAsset recently looked to find which cities with at least 250,000 residents have the lowest taxes to calculate a projected tax bill. In the study, each city was given a projected tax bill where the hypothetical employee earned an average of $45,000 annually and owned a home worth about $270,000. Income taxes were calculated by removing the standard deduction from each state at income level and applying applicable tax rates. Cities, like New York, that have their own income tax or those based in a county that have an income tax, the same was done at the city or county level.
15 – New Orleans, Louisiana
The average homeowner pays a meager 0.7% of their home’s value in real estate taxes annually.
14 – Santa Ana, California
That’s right. California made it to the list, and this city offers lower real estate and sales tax rates compared to other cities in the SoCal area. Together, the local and state taxes are 8%, which is a percent lower than LA, and the average taxpayer saves $250 each year.
13 – San Diego, California
Another California state made the list too. Many people would think that California’s taxes are high too, but it only applies for those whose income is on the higher end. These people pay the third-highest marginal rate in the country, 12.3%. However, the typical middle-class worker pays a marginal rate of 8% where the effective rate is closer to 3-4%.
12 – Denver, Colorado
Colorado’s state sale taxes comes to just 2.9% compared to 3.65% plus another 1% sales tax in other parts of the state. Altogether, their sales tax is at a rate of 7.65%, which is less than what big cities like Los Angeles or Chicago are paying.
11 – Washington, D.C.
Washington, D.C. is another place that is thought of as high in taxes because it is America’s capital. It is easy to think that when you noticed their top marginal income tax rate is at 8.95% (the seventh highest in the US). It only applies to income earned after taxpayers initial $40,000, which means the typical middle -class worker has a lower rate. The District is even kind enough to assist middle-class homeowners with “homestead deductions”, which lowers the taxable value of certain homes up to $70,000.
10 – Miami, Florida
It seems there is more to Miami than the beaches and sun. Residents here don’t have to worry about income taxes period, and their sales tax rate is only 7%.
9 – Mesa, Arizona
The city’s marginal tax rate is about 4.54% for those that make more than $150,000 annually. Those making less than $50,000 have a marginal rate of 3.36% and effective rate of 3%.
8 – Las Vegas, Nevada
Life is pretty good in Sin City. Las Vegas residents also do not have to worry about income tax, like Miami. Their sales tax rate is at 8.1%, and their effective property taxes are just 1% of the home’s value.
7 – Colorado Springs, Colorado
Local and state taxes here offer parents a great deal of support, especially with the child tax credit. The amount can range anywhere from 5-30%. The typical taxpayer in this state could receive $150 in credit, per child (six years of age and below) per year.
6 – Seattle, Washington
As a whole, Seattle has one of the highest sales tax rates at a total of 9.5%, which includes local and state taxes. However, a lot of the money that is initially lost at the cash register goes back in residents’ pockets on tax day. There are no income taxes here.
5 – Honolulu, Hawaii
Honolulu is situated in a state that collects both sales and income taxes, so most would assume their taxes are high. However, it is their low real estate taxes that makes up for it. Honolulu is special in the sense they only take 1/3 of a percent, instead of the usual 1%. It means the average taxpayer would pay less than $800 a year in real estate taxes.
4 – Henderson, Nevada
The city does well overall, and it shows during the fiscal year 2014 where they generated more than $700 million in gaming taxes. They also received another $15 in liquor taxes and $140 million in live entertainment. Nearly 50% of the state’s general fund revenue, of $2,8 billion, comes from the hotel-casino industry. It is no wonder they aren’t paying any income taxes, neither on the state or government level.
3 – Jacksonville, Florida
Although Jacksonville is the biggest city in the state, they have one of the lowest taxes. Florida, in general is looked at one of the best states to retire, especially in Jacksonville. There is also no state inheritance tax
2 – Tampa, Florida
It is not surprising that another Florida city made the cut. Tampa does not have any income taxes, and their state sales tax is at 6%. It’s far lower than any other state that doesn’t have income taxes either. It also has one of the best real estate taxes.
1 – Anchorage, Alaska
Anchorage takes the crown for the lowest. The state is extremely notorious for their taxpayer friendly regulations, especially the Permanent Fund Dividend. It is a yearly payment they is delivered to people who have lived in the state for a minimum of a year. The amount will vary on a yearly basis from $900-2,000.