Here’s Why Location Matters When Paying Taxes This Year

April 17th is quickly approaching and soon residents of the US will be paying taxes this year.  Of course, taxes come in all shapes and sizes. Location matters, and there’s no time like tax time to demonstrate why. 

When paying taxes this year, and throughout the year; it’s important to remember that not all taxes are created equal. Location matters when it comes to paying taxes. While federal taxes apply across all 50 states, the same isn’t the case for state and local level taxes.

States, counties, and cities all have the power to levy taxes on residents. A great article in USA Today broke down a few of these taxes that depend on your location.

State Income Tax

The biggest variation, especially when tax time is concerned, is state income taxes. When paying taxes this year, most Americans will file both a federal and state income tax return. Of course, this doesn’t apply to the states that don’t have state income tax!

Long seen as a benefit to cost of living, states with low (or no) state income tax often make up for it with higher property, sales, or excise taxes. 

Local Income Tax

Few localities charge a local income tax. The number which do are actually decreasing every year.  Per The Tax Foundation:

All counties in Indiana and Maryland impose a local income tax. In Ohio, 593 municipalities and 181 school districts have such a tax. 2,469 municipalities and 469 school districts in Pennsylvania impose local income or wage taxes. Many cities and school districts in Iowa and Michigan also have these taxes.

Sales Tax

After state income taxes, state sales tax is probably the type of tax that most people are familiar with. Sales tax varies by state or city. As previously mentioned, states with no income tax tend to have higher sales taxes.

Utility Taxes

Most Americans pay taxes on water, electricity, gas, heat, etc. How much you pay depends greatly on how much you use. The rate you pay varies by your location.

Excise Taxes

All states levy excise taxes. Excise taxes are taxes that are levied on a specific good. Alcohol, tobacco, and gasoline are all examples of products that have a tax added to them. Often, excise taxes are included in the cost of the product and not charged as an additional cost when purchasing.

Location Matters

All of the above taxes will vary based heavily on your location. City vs City knows this. That’s why we factor in all major state and local taxes when calculating cost of living. With City vs City, living expenses are calculated at the zip-code level.

If you’re thinking of moving, City vs City compares the cost of living in your city with another city of your choosing. As a result, you’ll see a side by side comparison of the costs of living. Which city comes out ahead? Download the City vs City app today and start comparing!