10 most tax-friendly states in the U.S.

Kiplinger
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These ten states impose some of the lowest taxes in the U.S., according to Kiplinger's 2014 analysis of state tax rules.

State taxes and the ways they are collected vary significantly across the country. For example, some states with low income taxes impose above-average sales or property taxes -- a big consideration if you intend to own your house. Most states allow cities and counties to add their own sales taxes, which can boost combined sales taxes in some cities to 10% or more.

SEE ALSO: 10 Least Tax-Friendly States in the U.S.

It's also important to consider the potential trade-offs. Low tax revenues may give a state less money to spend on education, transportation, public safety and other quality-of-life services important to you and your family. Then there's the unfolding drama in Kansas, where steep cuts in individual and business taxes enacted under Gov. Sam Brownback in 2012 to foster economic growth have drawn sharp rebukes from both Democrats and Republicans, who say the cuts threaten the state's fiscal health. S&P recently downgraded the state's credit rating.

But for those who have reason or need to live near state borders, which side you pick can make a significant difference in your tax burden.

1. Delaware

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Steve Snodgrass via Creative Commons/Flickr

State income tax: 2.2%-6.6%
State sales tax: None
Gas taxes and fees: $0.23 per gallon (National average is $0.31)

The First State is first on our list. Known for its tax-friendly treatment of corporations, Delaware imposes no sales tax on consumers. Its income tax rates cap out at 6.6% on taxable income above $60,000.

Delaware also has some of the lowest property tax rates in the U.S., according to the Tax Foundation. The median property tax on the state's median home value of $249,400 is $1,078, low compared to other states.

Excise taxes on beer and wine are also modest: 16 cents per gallon for beer and 97 cents for a gallon of wine.

2. Wyoming

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Peter via Creative Commons/Flickr

State income tax: None
State sales tax: 4%
Gas taxes and fees: $0.24 per gallon

Thanks to abundant revenues from oil and mineral rights, residents of the Cowboy State shoulder one of the lowest tax burdens in the U.S. (Note: Alaska actually pays individuals some of the revenues from its taxes on energy companies, but The Last Frontier has relatively high property taxes, so it isn't on our list.)

Prescription drugs and food for home consumption in Wyoming are exempt from state sales taxes. But counties can add up to 3% in additional sales levies.

The median property tax on the state's median home value of $184,000 is only $1,058, according to the Tax Foundation. The tax on beer is two cents per gallon, the lowest in the U.S.

3. Louisiana

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Clotee Allochuku via Creative Commons/Flickr

State income tax: 2%-6%
State sales tax: 4%
Gas taxes and fees: $0.20 per gallon

Residents of the Pelican State can deduct all of their federal income tax from state taxable income. Income tax rates range from 2% on less than $12,500 of taxable income to 6% on more than $50,000 of taxable income.

Property taxes here are the lowest in the nation. The median property tax on the state's median home value of $135,400 is just $243, according to the Tax Foundation.

While the state sales tax rate is low, local parishes and jurisdictions may add their own sales taxes, which can boost the total to 10.75%. But gas taxes are 20 cents a gallon, well below the national average of 31.1 cents per gallon.

SEE ALSO: 9 Costly Mistakes Taxpayers Make

4. Mississippi

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Joseph via Creative Commons/Flickr

State income tax: 3%-5%
State sales tax: 7%
Gas taxes and fees: $0.18 per gallon

The Magnolia State is home to some of the lowest property taxes in the nation. The median property tax on the state's median home value of $98,000 is $508, according to the Tax Foundation.

Gas taxes are 2 cents lower than in neighboring Louisiana (where gas taxes are also low) . Income tax rates are modest, although the top rate of 5% kicks in once taxable income exceeds just $10,000. Mississippi is one of a minority of states that charges sales tax on groceries. But prescription drugs, residential utilities, motor fuel and newspapers are all exempt.

Vehicle sales are taxed at 5%, two percentage points below the general sales tax rate. Mississippi charges an annual personal property tax based on vehicles' age and value. Rates are set at the county level. In Lamar County, for example, it's $305 for a vehicle valued at $20,000.

5. Alabama

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State income tax: 2%-5%
State sales tax: 4%
Gas taxes and fees: $0.21 per gallon

The Yellowhammer State moves up from 6th to 5th on our annual rankings because its state and local property tax collections, per capita, have dropped to the lowest in the U.S., according to the Tax Foundation. Income tax rates top out at a maximum rate of 5% on taxable income of more than $3,000 for single filers and $6,000 for married couples. Alabama also allows residents to deduct all of their federal income tax from state taxable income.

While the state's sales tax is 4%, additional levies from cities and counties boost the state average to 8.5%. And Alabama is one of a minority of states that doesn't exempt food from sales taxes. Prescription drugs and insulin-related items are exempt, however.

The median property tax on the state's median home value of $119,600 is a low $398, according to the Tax Foundation.

Alabama also has one of the lowest cigarette tax rates in the U.S., at just 43 cents per pack.

6. Arizona

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State income tax: 2.59%-4.54%
State sales tax: 5.6%
Gas taxes and fees: $0.19 per gallon

The Grand Canyon State's top income tax rate of 4.54% doesn't kick in until taxable income exceeds $150,000 for single filers or $300,000 for married couples. State gas taxes are well below the national average of 31.1 cents per gallon.

Like most states, Arizona excludes prescription drugs and food for home consumption from state sales taxes. However, all 15 counties levy an additional tax that ranges from 0.25% to 2%, and some extend that tax to apply to groceries.

There is also an annual vehicle license tax. The tax is based on an assessed value of 60% of the manufacturer's base retail price, reduced by 16.25% for each year since the vehicle was first registered in Arizona. The rate is $2.80 for new vehicles and $2.89 for used vehicles, for each $100 of assessed value. So for a vehicle costing $18,000, the vehicle license tax for the first year would be $302.

The median property tax on the state's median home value of $187,700 is $1,356, according to the Tax Foundation. Arizona moves from 5th to 6th this year.

SEE ALSO: 9 Surprising Things That are Taxable

7. Nevada

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State income tax: None
State sales tax: 6.85%
Gas taxes and fees: $0.33 per gallon

The Silver State is one of nine in the U.S. that impose no income tax. And unlike some other no- or low-income tax states, Nevada doesn't make up for lost revenue with high property taxes. The median property tax on the state's median home value of $207,600 is $1,749, below average for the U.S., according to the Tax Foundation.

Food and prescription drugs are exempt from the state's 6.85% sales tax. But counties may tack on up to 1.25%. In addition to sales taxes, vehicle owners are charged an annual "government services tax" that's based on the vehicle's value and age. Tax on a two-year-old vehicle with an original sticker price of $20,000 would be $298.

8. New Mexico

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State income tax: 1.7%-4.9%
State sales tax: 5.125%
Gas taxes and fees: $0.19 cents per gallon

The Land of Enchantment moves up to 8th this year, ahead of South Carolina, because the latest data from the Tax Foundation now ranks it 47 among all 50 states for state and local property tax collections. Personal income tax rates in the Land of Enchantment top out at 4.9% on taxable income over $16,000 for single filers and $24,000 for married couples filing jointly.

Gas taxes are below average for the U.S. Car buyers get a break: Sales taxes on motor vehicles are 3%, well below the overall sales tax rate.

Property taxes are among the lowest in the country. The median property tax on the state's median home value of $160,900 is $880, according to the Tax Foundation.

The state levies a sales tax of 5.125%, which is imposed on businesses and typically passed on to consumers. County and city sales taxes may add up to 3.56%. And unlike most states, New Mexico doesn't exclude food from sales taxes, although prescription drugs are exempt.

9. South Carolina

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State income tax: 3%-7%
State sales tax: 6%
Gas taxes and fees: $0.17 cents per gallon

The Palmetto State's top income tax rate of 7% kicks in once taxable income exceeds $14,400.

Groceries and some cold prepared foods, prescription drugs, dental prosthetics and hearing aids are exempt from state sales taxes. Localities can add up to 3% in sales taxes. But the state's gas tax is well below the national average at 17 cents per gallon.

In addition to the state sales tax, South Carolina levies an annual tax on vehicles. Rates are set by counties. The average annual tax for a vehicle valued at $10,000 is $268.

Property taxes are among the lowest in the U.S. The median property tax on the state's median home value of $137,500 is $689, according to the Tax Foundation.

SEE ALSO: Most Expensive U.S. Cities to Live In

10. West Virginia

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State income tax: 3%-6.5%
State sales tax: 6%
Gas taxes and fees: $0.36 cents per gallon

The Mountain State's property taxes are among the lowest in the U.S., according to the Tax Foundation. The median property tax on the state's median home value of $94,500 is $464. Income tax rates are also modest. They range from a low of 3% on up to $10,000 of taxable income to a high of 6.5% on taxable income of $60,000 or more.

Nonprepared food and prescription drugs are exempt from the 6% state sales tax, and vehicles are taxed at 5%. Municipalities may add a local tax of up to 1%. The tax on beer is low, at just 18 cents per gallon.

Two caveats: Gas taxes are above the national average here. And West Virginia is one of a handful of states that taxes Social Security benefits.

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