When you receive your paycheck, do you ever look at the state income tax withholding and think about relocating? I think all of us, unless we're lucky enough to live in a state with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) do that at one time or another. But where do we go? We decided to do a quick state income tax comparison by calculating annual withholding amounts for two 'typical' employees. We realize that by comparing withholding amounts, rather than actual, calculated income tax liabilities, we are only estimating ranking among states but thought the resulting approximation would provide us some food for thought in our relocation consideration.
We first defined our 'typical' employees:(1) Ms. Red is single, has no dependents, claims 1 exemption, does not itemize deductions, and makes $24,000 per year.(2) Mr. Green is married (and his wife has no income), has two kids, claims 4 exemptions and makes $60,000 per year. We do not account for any local taxes such as those required in Pennsylvania and Ohio. No disability withholding is taken into consideration either. Examples of this are California, New York and Hawaii. For the example, we visited Paycheck City and set up our two employees in the 'Paycheck Calculator'. Finally, we ran a payroll for each employee for each state and tabulated the results (shown below).
Tax year 2008 comparison
StateMs. Red: Single-1Mr. Green: Married- 4StateOregon14213618WisconsinHawaii12793552OregonIdaho12083324North CarolinaWisconsin12003310ArkansasNorth Carolina11683303HawaiiUtah10753171Washington DCKentucky10663094KentuckySouth Carolina10513074South CarolinaMinnesota9922944IowaWashington DC9802927New YorkGeorgia9502806VirginiaMassachusetts9412722MontanaMaine9352682MassachusettsMississippi9352620MississippiMontana9042589IdahoVirginia8972500UtahMaryland8932476GeorgiaMichigan8922295West VirginiaArkansas8802293OklahomaColorado8612286MaineOklahoma8542236NebraskaIowa8432224AlabamaAlabama8302180MinnesotaIndiana7822147MarylandWest Virginia7802142DelawareKansas7592138MissouriNebraska7562028OhioNew York7382001MichiganPennsylvania7371988KansasMissouri6781842PennsylvaniaDelaware6701802IndianaRhode Island6691800ConnecticutIllinois6601796ColoradoVermont6431637LouisianaNew Mexico6341560IllinoisArizona5731501New MexicoLouisiana5651483Rhode IslandOhio5381368VermontNew Jersey3601231ArizonaNorth Dakota3531062New JerseyCalifornia333996CaliforniaConnecticut298777North Dakota
Again, because our comparison is based upon withholdings (which may or may not take into account excess itemized deduction amounts) and not actual liabilities, take the results with a grain of salt. But the next time you think of relocating, you might have some idea where to start!
These free resources should not be taken as tax or legal advice. Content provided is intended as general information. Tax regulations and laws change and the impact of laws can vary. Consult a tax advisor, CPA or lawyer for guidance on your specific situation.