Here’s How Tax-Friendly Virginia, DC Are: Kiplinger

WASHINGTON, DC — Virginia is labeled as a tax-friendly state in the country thanks to relatively low property taxes and is in a group of nine other states where residents face about the same tax burden, while the District of Columbia has a mixed tax picture.

The designation comes from Kiplinger’s tax map for 2019, which was updated in October. The map divides states up into five categories for taxes: most tax-friendly, tax-friendly, mixed, not tax-friendly and, finally, least tax-friendly.

According to the map, the most tax-friendly state in the country is Wyoming, where there is no state income tax and a 0 percent effective income tax rate. Two other states out West — Nevada and Alaska — along with Tennessee and Florida rounded out the top five spots for the most tax-friendly states.

"The Old Dominion has middle-of-the-road income taxes and relatively low property taxes. Note that while the sales tax is low, groceries are taxed," Kiplinger says.

Here’s what makes Virginia one of the tax-friendly states in the nation:

• Sales tax: 5.3% state levy, including 1% that is allocated to local governments. Northern Virginia and the Hampton Roads area have an additonal 0.7% sales tax to pay for transportation improvements, giving the state an average combined rate of 5.65%, according to the Tax Foundation. Groceries are taxed at 2.5% statewide.
• Effective tax rate: 4.83% for single filers, 5.38% for joint filers
• Property taxes: In Virginia, residents pay $858 in taxes per $100,000 of assessed home value.
• Vehicle taxes: A 4.15% “motor vehicle tax” applies to purchases; this is lower than the prevailing sales tax. Vehicles are also subject to an annual vehicle personal property tax. Localities assess vehicles and administer the tax.
• Inheritance and estate taxes: None.

Kiplinger says of the District of Columbia's tax structure: "Living in the Nation’s Capital can be expensive. Though property and sales taxes are unexceptional, the District of Columbia takes a huge bite of income. Taxable income over $40,000 is taxed at a steep 6.5% tax rate (the top rate of 8.95% is reserved for taxable income over $1,000,000)."

Here’s what makes DC a mixed picture on taxes:

• Sales tax: The District of Columbia has a 6% sales tax.
• Effective tax rate: 4.62% for single filers, 4.74% for joint filers.
• Property taxes: In District of Columbia, residents pay an average of $603 in taxes per $100,000 of assessed home value.
• Vehicle taxes: Drivers pay an excise tax — when a new vehicle is first registered in the District — that ranges from 6% to 8%, depending on the vehicle’s weight.
• Inheritance and estate taxes: Estates valued over $5.6 million are subject to estate tax. Rates range from 8% to 16%.

See your state’s full tax profile.

Illinois topped Kiplinger’s list as the least tax-friendliest state in the nation. Along with Wisconsin, the tri-state area consisting of Connecticut, New York and New Jersey, made up the remainder of the top five least-friendliest states in the U.S.

Kiplinger used tax data from each state’s tax agency, the U.S. Census and other sources to compare each state’s tax burden. The tax-friendliness was calculated based on the sum of income, sales and property tax that a sample filer paid in each state. The full methodology and the profile of the sample filers are found on Kiplinger’s website.