Tax season brings about a full range of emotions in the United States. Some Americans look forward to tax refund season, but others have more complicated situations and tax debts they may not be able to pay. With millions of consumers searching for tax relief across the country, the ConsumerAffairs research team wanted to determine which states would need tax relief the most in 2020.
Methodology: We evaluated multiple factors to determine which states’ residents would most likely seek professional assistance to deal with tax debts.
- Information about the tax rates in each state: We looked at several variables to determine this, including the state’s tax burden (the total percentage of income earned in a state that goes to state and local taxes), the average amount of income tax paid by each resident and that state’s property and sales tax rates.
- Data collected by ConsumerAffairs: We gathered information from more than 5,000 U.S. residents seeking tax relief, including how much tax debt they owed, whether the government was garnishing their wages and if they owed back taxes to their state of residence.
- Internet search trends: We tracked search trends on popular queries related to tax relief to fully understand where consumers were looking for tax relief solutions.
Top 10 states likely to need tax relief in 2020
By combining data from all of the factors listed above and weighing it based on importance, we determined that these were the top 10 states that would need tax relief the most in 2020.
- 1. New York
- New York carries the highest tax burden in the nation — 12.7% of all income in the state goes to state and local taxes — so it’s not surprising that the state’s residents often need tax relief help. New York also has some of the highest income and property taxes in the nation. On average, property taxes in New York land just shy of $3,000 a year for each resident, and New Yorkers pay up to 8.82% in state income tax.
New Yorkers also pay local income taxes on top of state and federal income taxes. These local taxes end up costing an average of around 1.5% of residents’ gross income.
- 21% of New York participants who told ConsumerAffairs they needed tax relief had all or part of their paychecks garnished.
- 29% of New York respondents that we talked to had more than $30,000 in tax debt.
- 2. Delaware
- Delaware residents do not pay any sales tax, but they do pay an average of $1,708 each in state income taxes every year — a figure that ranks among the top 10 highest in the nation. The state’s median annual income lands in the top tax bracket, so many Delaware residents face a 6.6% state income tax rate each year. A significant amount of Delaware residents are searching for tax help on Google: The states’ residents ranked second in the nation for searching for tax debt-related terms.
- Of the Delaware participants we spoke to, 77% of them owed back taxes to the state government.
- 57% of Delaware respondents who told ConsumerAffairs they needed tax relief had between $10,000 and $20,000 in tax debt.
- 3. Connecticut
- Connecticut follows right behind New York in terms of tax burden: 12.6% of all state income goes toward state and local taxes. Connecticut also has some of the highest property taxes in the nation — the annual state and local collections average out to $3,020 per resident.
For the many Connecticut residents in need of tax relief, hope isn’t lost. The state has a state-sponsored tax amnesty program that gives residents a penalty-free way to pay late or missed state taxes at a reduced interest rate without facing criminal prosecution.
- Only 17% of Connecticut participants who told ConsumerAffairs they needed tax relief were struggling with wage garnishments.
- Of the Connecticut residents who told ConsumerAffairs they needed tax relief, equal percentages (32%) had between $10,000 and $20,000 in tax debt or more than $30,000 in tax debt.
- 4. Maryland
- The tax burden for Maryland residents is a heavy 10.9%, which comes out to an average of $5,920 per person each year. With residents subject to state income tax rates up to 5.75% and property taxes that rank among the top 20 in the nation, it’s no surprise that tax season isn’t the most wonderful time of the year in Maryland.
- Only 11% of Marylanders who reached out to ConsumerAffairs wanted tax relief in order to avoid IRS liens and levies. Around 44% were seeking ways to reduce their income tax debt, and 66% needed help with back taxes owed to the state.
- Almost 31% of Maryland respondents who told ConsumerAffairs they needed tax relief had more than $20,000 in tax debt.
- 5. Georgia
- Georgia residents have a state income tax rate of up to 5.75% and an overall tax burden around 9.1%, which results in each person in the state paying around $3,426 annually. While neither of these rates are particularly high, many Georgia residents are still seeking solutions to tax issues — the states’ residents ranked fourth in the country for searching for tax relief on Google, which helped it land in the fifth spot for states most likely to need tax relief assistance.
- 21% of Georgia participants told ConsumerAffairs they needed tax relief because they wanted to avoid IRS liens and levies.
- 39% of Georgia respondents who told ConsumerAffairs they needed tax relief had between $10,000 and $20,000 in tax debt.
- 6. Rhode Island
- Rhode Island has the eighth highest tax burden (10.8%) in the nation and the seventh highest property tax collections amount — $2,407 per resident. Rhode Island also has a 7% state sales tax rate, which comes in second to California for the highest sales tax in the nation. All of these factors contribute to Rhode Island ranking in the top 10 even though the volume of Google searches in Rhode Island ranked 19th, which is significantly lower than the other top 10 states.
- 47% of Rhode Island respondents who told ConsumerAffairs they needed tax relief wanted to reduce their income tax debt.
- 76% of Rhode Island participants had between $10,000 and $20,000 in tax debt.
- 7. New Jersey
- New Jersey has the third highest overall tax burden in the nation (12.2%), and residents pay an average of $6,926 each year toward state taxes. State income tax rates in New Jersey range from 1.4% to a hefty 10.75%, but the median household income falls steadily in the middle of the pack in the 5.525% bracket. Residents of New Jersey also pay the highest percentage of property taxes in the nation compared to home value and the highest dollar amount: 2.21% of the property value, which equals an average collection of $3,276 per resident.
- 24% of New Jersey respondents who told ConsumerAffairs they needed tax relief had all or part of their paychecks garnished.
- 40% of New Jersey respondents seeking tax relief told ConsumerAffairs they had more than $30,000 in tax debt.
- 8. California
- California’s state income tax brackets range from 1% to 13%, which is the highest state income tax percentage in the nation. Its tax burden, which comes in fourth highest in the nation, is 11%, with residents paying $5,237 per capita. Californians also pay some of the highest state and local sales taxes in the nation — the combined average rate is 8.66%.
While most of California’s taxes are high in comparison to other states, its property taxes are surprisingly low, ranking 35th overall with an average annual collections amount of $1,607 per resident.
- 34% of California respondents who reached out to ConsumerAffairs said they needed tax relief in order to reduce their income tax debt.
- 36% of California respondents who told ConsumerAffairs they needed tax relief stated they had more than $30,000 in tax debt.
- 9. Mississippi
- Mississippi residents aren’t subject to extremely high taxes, but the state tied with Delaware for second place in terms of people searching for tax relief related queries on Google. The state has three tax brackets — 3%, 4% and 5% — and one of the 10 lowest tax burdens in the nation at 8.6%. Property taxes in Mississippi are a higher percentage of property value than other states, but the average collection amount of $1,017 per person is still one of the lowest in the country.
- 69% of Mississippi respondents who talked with ConsumerAffairs stated they owed back taxes to the state.
- 32% of Mississippi respondents who told ConsumerAffairs they needed tax relief had between $10,000 and $20,000 in tax debt.
- 10. North Carolina
- With a flat state income tax of only 5.25% and one of the lowest property tax collections ($974 on average per resident each year), we were surprised that North Carolina finished in the top 10 states struggling with taxes. However, the state ranked 13th in Google Trends data for the volume of tax- and debt-related searches and third in our internal data study. These statistics, coupled with its slightly-higher-than-average tax burden (9.8%), secured North Carolina’s spot as 10th on the list.
- 30% of North Carolina respondents who told ConsumerAffairs they needed tax relief had part or all of their paychecks garnished.
- 52% of North Carolina respondents who spoke to ConsumerAffairs had between $10,000 and $20,000 in tax debt.
10 states that won’t need tax relief in 2020
While residents in some states cringe at the mention of tax season, others have fewer issues dealing with the annual cost. By using the same methodology and approach that we took to find the top 10 states struggling with tax relief, we were also able to determine the top 10 states that won’t sweat tax season in 2020.
- 1. Wyoming
- More than any other state, Wyoming won’t stress tax season this year. With the sixth lowest combined state and local sales tax (5.34%) and no state income tax, Wyoming residents pay some of the lowest taxes in the country. Although the state's residents pay the 11th highest dollar amount in property taxes, that amount is 47th in the nation when expressed as a percentage of the property value.
- 2. South Dakota
- With one of the lowest tax burdens in the nation (7.1%) and one of the lowest tax relief-related search volumes on Google, South Dakota is one of the top two states that won’t mind tax season in 2020. South Dakota boasts a low state and local sales tax of 6.4%, but its property tax payments ranks among the highest in the nation at $1,621 per capita.
- 3. Alaska
- Alaska has three low state income tax brackets (2%, 4% and 5%) that allow for federal income tax deductions and an overall tax burden of 8.7%, which is one of the fifteen lightest in the nation. The state also has a low Google search volume for tax relief issues.
Even though Alaska ranks in the top 10 states that won’t mind tax season, the state does have one of the highest state and local sales tax rates in the nation. Residents pay a 5.22% average local sales tax and a combined sales tax rate of 9.22%.
- 4. Montana
- Montana’s highest income tax rate (6.9%) matches the middle bracket for most other states, and its 8.7% tax burden is one of the 15 lowest in the nation. Montana’s property tax is slightly above average as a percentage of property value, but the actual property collections amount is still low at $1,039.
- 5. Vermont
- Vermont’s tax burden is one of the top 10 highest in the country, but as the state with the lowest Google search volume for tax relief-related terms, residents don’t seem concerned about the 10.3% burden. The state has four tax brackets that range from 3.35% to 8.75% and a property tax that’s fourth highest in the nation at $2,670 per capita.
- 6. Nebraska
- Nebraska’s tax burden is 9.2%, which works out to an average of $4,197 per resident. This figure lands it safely in the bottom half of states when comparing overall tax burdens. Nebraskans also have fairly low income taxes, with residents paying between 2.4% and 6.8% in state income taxes each year. Other states are subject to income taxes as high as 10%.
- 7. Washington
- Washington is one of seven states that doesn't impose a state income tax. With a 9.3% state and local tax burden and a property tax that falls right in the middle of the pack, Washington residents most likely won’t need to stress about tax season this year. It also had the second lowest search volume on Google for tax relief-related terms.
Even though Washingtonians don’t face high state income or property taxes, they are subject to some of the highest sales taxes in the nation — the combined state and average sales tax is 9.21%.
- 8. Texas
- Texas is famous for not having a state income tax, and with one of the lowest state tax burdens (7.6%), the Lone Star state’s residents probably won’t feel the heat during tax season. In terms of property taxes, Texas residents pay an average of $1,872 each, which is more than most states but not enough to take them out of the top 10 states least likely to need tax relief.
- 9. Iowa
- Iowa’s tax burden is 9.2%, but the highest state income rate bracket is 8.53%. While Iowa’s state income taxes aren’t significantly lower than other states, it allows residents to deduct some or all of their federal taxes from state taxable income. This deduction is a big perk for tax-paying residents, considering most are subject to paying local income tax on top of state income tax.
- 10. Utah
- With a flat state income tax of only 4.95%, Utah comes in 10th on our list of states that probably won’t struggle during tax season. Utah’s tax burden falls in the middle of the pack at 9.6%, but it has a low cost of living and some of the lowest property taxes in the nation.
Another reason why Utah residents may not struggle with tax season is the state-sponsored Fresh Start program, which allows residents to file past tax returns without fear of prosecution and potentially waives penalties for each approved tax return.
States most likely to need tax relief, ranked