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These 7 States Keep Your Taxes Simple

Today's tax day, and hopefully your taxes are done. Taxes are a hassle to put together and can be quite complicated. While many states have progressive income taxes, some states have a flat tax, making what you owe far simpler to calculate

There are seven U.S. states with a flat income tax, or 14 if you include the 7 states with no income tax. 

The 7 States With a Flat Income Tax

  1. Colorado
  2. Illinois
  3. Indiana
  4. Massachusetts
  5. Michigan
  6. Pennsylvania
  7. Utah

In examining a state's tax situation, you can't just look at a state's income tax. You should research and consider all the taxes in a state and how those will affect your particular situation. A good place to start out is the Tax Foundation, which has been collecting data on taxes since 1937 and takes into consideration an average of both state and local taxes.

The 7 states with a flat income tax
Let's go through the states with a flat income tax one by one using the Tax Foundation's most recent data, which is from July 2012.

1. Colorado
Colorado makes residents pay individual income taxes at a flat rate of 4.63%. The state also has a flat 4.63% income tax on corporations and charges a 2.9% sales tax. In 2010, per capita property tax was $1,601, and combined with all other taxes, the per capita state and local tax paid was $4,104, according to the Tax Foundation.

2. Illinois
Illinois makes residents pay individual income taxes at a flat rate of 5%. The state also has a flat 9.5% income tax on corporations and charges a 6.25% sales tax. In 2010, per capita property tax was $1,827, and combined with all other taxes, the per capita state and local tax paid was $4,512, according to the Tax Foundation.

3. Indiana
Indiana makes residents pay individual income taxes at a flat rate of 3.4%. The state also has a flat 8% income tax on corporations and charges a 7% sales tax. In 2010, per capita property tax was $1,182, and combined with all other taxes, the per capita state and local tax paid was $3,294, according to the Tax Foundation.

4. Massachusetts
Massachusetts makes residents pay individual income taxes at a flat rate of 5.25%. The state also has a flat 8% income tax on corporations and charges a 6.25% sales tax. In 2010, per capita property tax was $1,986, and combined with all other taxes, the per capita state and local tax paid was $5,422, according to the Tax Foundation.

5. Michigan
Michigan makes residents pay individual income taxes at a flat rate of 4.35%. The state also has a flat 6% income tax on corporations and charges a 6% sales tax. In 2010, per capita property tax was $1,453, and combined with all other taxes, the per capita state and local tax paid was $3,503, according to the Tax Foundation.

6. Pennsylvania
Pennsylvania makes residents pay individual income taxes at a flat rate of 3.07%. The state also has a flat 9.99% income tax on corporations and charges a 6% sales tax. In 2010, per capita property tax was $1,261, and combined with all other taxes, the per capita state and local tax paid was $4,183, according to the Tax Foundation.

7. Utah
Utah makes residents pay individual income taxes at a flat rate of 5%. The state also has a flat 5% income tax on corporations and charges a 5.95% sales tax. In 2010, per capita property tax was $837, and combined with all other taxes, the per capita state and local tax paid was $3,181, according to the Tax Foundation.

It's not all about taxes
There's more to consider before moving than just tax rates, but it doesn't hurt to start there, especially if you are living off interest and dividends.

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Read/Post Comments (12) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 15, 2013, at 10:56 AM, EGTalbot wrote:

    This is silliness. The complexity in state taxes has little to do with rates and everything to do with differences between the state and federal treatments of income and deductions. And income tax rates are only one piece of the picture - I formerly lived in Florida with no income tax, but I had a higher state tax burden than I do now living in Massachusetts.

    And despite the flat tax rate you mention, Massachusetts is actually a difficult state to calculate because of all those variations. Neighboring Connecticut on the other hand is relatively easy despite multiple tax brackets.

    All the brouhaha about a flat tax is (by design I suspect) completely misleading. For federal taxes for instance, you could have fifty tax brackets but if you eliminated all deductions and treated all income the same, it would be far simpler than our current system.

  • Report this Comment On April 15, 2013, at 11:41 AM, SeattleGreg wrote:

    You've left of the states that make it the simplest of all - zero income tax. Where are those states on your map?

  • Report this Comment On April 15, 2013, at 12:38 PM, greyhound44 wrote:

    Mine are simple: I have lived in colonial Mexico for nearly 10 years; 25 years in Dallas prior (no state income tax), and have not paid income tax in the US since 2007.

  • Report this Comment On April 15, 2013, at 12:45 PM, cwnuechter wrote:

    I will bet that California is the most complicated. They have too many pinheads legislating.

  • Report this Comment On April 15, 2013, at 12:46 PM, DRK2 wrote:

    Don’t you think it would have been noteworthy to highlight that Illinois does not tax money from pensions, IRAs, or 401Ks, or that Tennessee only taxes dividends and interest?

    What else did you leave out?

  • Report this Comment On April 15, 2013, at 12:59 PM, jimmymae wrote:

    T E X A S

    This State keeps it really simple, there isn't any.

  • Report this Comment On April 15, 2013, at 1:25 PM, rmac7 wrote:

    I don't know about the other states, but Indiana has various County taxes ( except Lake ) that are on your tax form when you file your state tax. So it is not a real flat rate.

  • Report this Comment On April 15, 2013, at 2:08 PM, BillBeers wrote:

    Once again the author of this article is misleading and dishonest. 7 other states keep taxes simple, they have no state income taxes. Do these 7 states have sales taxes ? Yes they do. Do these 7 states have property taxes ?? Yes they do. While the article lists state income tax for these states, there is no mention of county or city income taxes. While this article lists state sales tax there is no mention of county or city sales tax. At least 2 of these states require workers to join a union in order to be employed that amounts to an employment tax. the authors of this article write from a certain political perspective which turns it into nothing more that political propaganda

  • Report this Comment On April 15, 2013, at 3:10 PM, cavman35 wrote:

    I live in New Hampshire where we have no sales or income tax and my property tax is over $7,000 on a property valued at a little over $200,000. If you go by Per Capita the average tax is only $1100 and we rank as number two lowest in taxes but since no 5 year old kids own property and they pay zero tax on any purchases and they don't have an income tax plus they pay zero in taxes so the property owners are the primary support for the state. Now going just by those that pay the bill we are the 4th highest tax in the US. It's all in the numbers. By the way my company tried to get me to move to Texas and you have more local and county plus school district taxes that well nickle and dime you to death so I said NO.

  • Report this Comment On April 15, 2013, at 3:58 PM, Plaintired wrote:

    Yeah Illinois is real easy to file. Three lines: 1. What was you total income? 2. How much in state tax was withheld? 3. Send us the rest!

  • Report this Comment On April 15, 2013, at 6:15 PM, CluckChicken wrote:

    Pennsylvania does not have simple taxes. The State tax may be simple but then we got county and worse borough taxes.

  • Report this Comment On April 15, 2013, at 9:14 PM, phexac wrote:

    lol - a misleading ignorant article followed by a shameless sales pitch.

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Dan Dzombak
TMFDanDzombak

Dan Dzombak has written for The Motley Fool since 2008. He covers value investing, investing process, and success among other things. You can follow him on Twitter by clicking the button below or head over to his blog at http://www.DanDzombak.com

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