Why state taxes matter for remote workers
The rise of remote work has untethered millions of workers from their employer's location. Where you used to live where your company was, you can now choose to live in any state — and that choice can be worth tens of thousands of dollars per year.
State income tax rates vary enormously. California taxes top earners at 13.3%, while Texas, Florida, Nevada, Washington, Wyoming, South Dakota, and Alaska charge no state income tax at all. For someone earning \$150,000, that difference alone can amount to \$15,000 or more per year.
But income tax is only part of the picture. States without income tax often make up for it with higher sales taxes, property taxes, or other levies. This tool helps you see the complete picture: the total tax burden across income tax, sales tax, and property tax combined, so you can make an informed decision about where to live.
Types of state taxes compared
**State Income Tax** Most states impose a graduated income tax similar to the federal system, with rates that increase as income rises. Nine states currently have no state income tax: Alaska, Florida, Nevada, New Hampshire (on wages), South Dakota, Tennessee (on wages), Texas, Washington, and Wyoming. A few states use a flat rate — a single percentage applied to all income regardless of amount.
**Sales Tax** Sales tax is paid whenever you buy goods and some services. While the rate is easy to look up, the actual annual amount you pay depends on your spending habits. Higher earners typically spend more in absolute terms, so their effective sales tax burden is higher. Some states exempt groceries and medications from sales tax, which reduces the real-world impact.
**Property Tax** If you own a home, property tax is a major annual expense. Rates vary widely by state and even by county. New Jersey and Illinois are known for high property taxes, while Hawaii and Alabama have some of the lowest effective rates. This tool estimates your annual property tax based on your home's value and the state's average effective rate.
**Total Tax Burden** The most useful metric for comparison is your total tax burden — the combined cost of all three major state taxes as a percentage of your income. This paints a complete picture and often reveals surprising results: a state with no income tax might still have a higher total burden due to elevated property and sales taxes.
States with no income tax
Nine states impose no income tax on wages and salaries, making them attractive destinations for high earners and remote workers:
- **Alaska** — No income tax, no sales tax. Residents even receive annual dividends from the Permanent Fund. - **Florida** — No income tax and a moderate sales tax. Popular with retirees and remote workers. - **Nevada** — No income tax. Higher sales tax helps fund state services. - **New Hampshire** — No tax on wages or salary (historically taxed interest and dividends, but phased out). - **South Dakota** — No income tax and relatively low overall tax burden. - **Tennessee** — No tax on wages. Previously taxed investment income, now fully eliminated. - **Texas** — No income tax, but higher property taxes than average. - **Washington** — No income tax, but higher sales tax. Capital gains tax introduced in 2022. - **Wyoming** — No income tax and low overall tax burden.
Moving to a no-income-tax state can produce significant savings, but always model the full picture including property taxes and cost of living before deciding.
How to use this tool
1. Enter your annual gross income — the amount you earn before any taxes are deducted. 2. Select your filing status: Single, Married Filing Jointly, or Head of Household. This affects which tax brackets apply. 3. Indicate whether you own a home. If yes, enter an estimated home value so property tax can be included. 4. Add the states you want to compare — up to 5 at a time. 5. Mark your current state so it is highlighted in the results. 6. Click "Compare Tax Burden" and wait for the AI to calculate current tax rates for each state. 7. Review the ranked results, the bar chart showing total burden, and the detailed breakdown table.
FAQs
Q: Which state has the lowest overall tax burden? A: It depends on your income level, whether you own a home, and your spending habits. Wyoming, South Dakota, and Alaska consistently rank among the lowest total burden states, but the answer varies by situation. Use this tool with your specific numbers to find out.
Q: Do I pay taxes in the state I work or live? A: Generally, you pay income tax in the state where you live (your domicile state). If you work remotely for a company in another state, most states only tax income earned within their borders. However, some states — notably New York — have a "convenience of the employer" rule that can require you to pay their taxes even if you work remotely. Always verify with a tax professional if you work for an out-of-state employer.
Q: What is effective tax rate vs marginal rate? A: Your marginal tax rate is the rate applied to the last dollar you earn — the top bracket you fall into. Your effective tax rate is the average rate you actually pay across all your income. For example, if a state has a 10% top bracket but your first \$20,000 is taxed at 0% and the next \$30,000 at 5%, your effective rate will be much lower than 10%. This tool calculates dollar amounts using actual brackets for accuracy.
Q: Does this account for local income taxes? A: The comparison focuses on state-level taxes. Some cities — like New York City, Philadelphia, and Portland — also impose local income taxes that can add 1-4% to your burden. These are not included in the state comparison but are worth researching separately if you are considering a specific city.
Q: How accurate are the estimates? A: The AI uses current published state tax brackets and average effective rates for sales and property taxes. These are estimates, not exact calculations. Your actual tax bill will depend on deductions, credits, local rates, and other factors specific to your situation. Use these results for directional comparison and consult a tax professional for decisions with major financial consequences.
Q: Why does the tool use AI instead of a built-in calculator? A: State tax rates change every year as legislatures update brackets, introduce or eliminate taxes, and adjust rates. Rather than maintain a database that could quickly become outdated, this tool queries AI with current knowledge to ensure you get rates that reflect recent law changes.
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