If you’re thinking of relocating to another state to save on taxes then be sure to avoid New York, New Jersey and Connecticut. A new report suggests that these three states are the worst when it comes to tax rates.
Forbes published a report last month entitled “Worst States for Taxes,” and it found that the states of California, Wisconsin, Minnesota, Maryland, Rhode Island, Vermont and Pennsylvania rounded out the top 10.The publication came to this conclusion by comparing local taxes and the effective tax rate for single individuals with $50,000 in official income. This was based on the U.S. household income of $53,046 from 2009 to 2013.
According to the methodology, the report does not identify what local taxes are included since some states adopt a local sales tax while others maintain a local income tax. It does admit that the formula is a little bit complicated because of the variety of states:
“Comparing states income tax rates is a bit tricky, since taxation approaches vary widely. Many states have a graduated system — the most complicated one is Hawaii with 12 different rates for income in different brackets. Eight states charge residents the same flat percentage of their incomes regardless of how large their salaries are, including Colorado (4.63% of federal taxable income), Indiana (3.75%), and Illinois (3.3%). And there are seven states that don’t levy an income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.”
But in a state like New Jersey, its property tax rate probably had some sort of an effect on its ranking. The average property tax bill in the Garden State was $8,161, but only 0.2 percent of homeowners nationwide doled out more than $8,000.
The No. 1 ranking – New York – maintains a state and local tax burden of 12.6 percent, while the effective state tax rate for $50,000 taxable income is 5.46 percent. New Jersey’s state and local tax burden if 12.3 percent with an effective state tax rate for $50,000 taxable income of 2.54 percent. The state and local tax burden for the state of Connecticut is 11.9 percent and an effective state tax rate for $50,000 taxable income of 4.6 percent.
Considering how high some of these taxes can be, you may need to find loans just to pay your taxes during the much dreaded tax season between February and April!
2016 Tax Brackets – a Look at Tax Brackets, Exemptions and Deductions
Every year, the Internal Revenue Service (IRS) releases an adjusted list of tax brackets, exemptions, deductions and other tax-related thresholds. The purpose of these modifications is to ensure taxes keep up with the effects of inflation.
Just what can you expect start paying your 2016 taxes in early 2017? Here is a comprehensive list of just what your taxes will look over the coming year:
The threshold for the top tax rate (39.6 percent) has increased by 0.45 percent for both single and joint filers. The thresholds for other individual tax rates (10 to 35 percent) have gone up only slightly.
For next year, the personal exemption amount goes up from $4,000 (2015) to 4,050. The standard deduction amount remains the same, except for taxpayers who file as their taxes as head of the households.
How will this affect the average American? Since the median U.S. household income was $53,657 in 2014, the amount of taxes you owe shouldn’t go up by much because of low inflation levels year-over-year. In fact, if you’re a married couple with one child earning the median income then the extra amount of taxes you’ll owe will be $9.
Here are a few other adjustments made to various tax policies: