The Best Money-Saving Tax Tips for Each State

Paying taxes may be a fact of life, but depending where you live, you may be able to keep a little extra money in your pocket thanks to some state-specific tax breaks. From socking away money in a college savings fund to donating to a charitable cause, there are plenty of ways to save money with available tax credits and deductions — if you qualify. While heading into tax season, shoebox of receipts in hand, keep in mind these money-saving tax tips from each state.

Note: Be sure to consult a tax adviser to confirm benefits that might be available based on your state or individual status.

Related: Tax Law Changes You Need to Know Before Filing a Return in 2021

Families and individuals saving for college can benefit at tax time thanks to the CollegeCounts 529 Fund, a plan that offers tax deferral for savings within the account as well as tax-free withdrawals for certain college expenses. The fund can help meet college costs nationwide, even if you don't live in the state. While most states offer 529 plans, Alabama taxpayers have it good: They are eligible for a state income tax deduction up to $5,000 for individuals and $10,000 for couples filing jointly when both contribute.

Alaska is one of a handful of states that doesn't withhold personal income tax — the others are Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — which helps save a bundle. The state also exempts from property taxes the first $150,000 of assessed value for disabled veterans and seniors 65 and older. And if you happen to be a whaling captain recognized by the Alaska Eskimo Whaling Commission, you can deduct up to $10,000 for whaling-related expenses.

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Taxpayers who itemize deductions can take advantage of several state-specific tax credits while getting a federal deduction for the same charitable deductions. The credits include donating to the state's public school system (up to $200 for individuals and $400 for family) even if you don't have a student enrolled. Taxpayers can also donate to a qualifying state foster care charitable organization, the Arizona State Department of Veteran Services, and organizations that help the working poor. Other items that may be deductible include fees from cars bought outside the United States and medical expenses.

Related: 36 Reputable Charities That Are Worth Supporting

Individuals and businesses that own historic properties in Arkansas can make the most of a law that increases the state tax credit on certified rehabilitation projects. While it may not apply to many, if you own a property listed on the National Register of Historic Places or contribute to National Register historic districts, you can claim a tax credit on 25% of at least $1.5 million of eligible expenses — more than triple the amount before the law was passed. And efforts are underway to increase the cap.

If you rent your home and have personal income tax liability, you may be eligible for the state's renters credit, which applies if your adjusted gross income is $43,533 or less as an individual or $87,066 or less if married (or are registered domestic partners) and filing jointly. The credit isn't huge — $60 for individuals and $120 for couples — but, hey, everything counts at tax time. Certain income is also exempt from income taxes, including Social Security, state tax refunds, unemployment compensation, and state lottery winnings (fingers crossed).

Related: 31 Tax Credits and Deductions That Could Save You Thousands

Low-income, elderly and disabled taxpayers may be eligible for a rebate on property tax and heating costs, including those paid as part of rent payments or directly. Known as the Property Tax/Rent/Heat Credit rebate, or "PTC" rebate, the total amount is determined by income and expenses.

A phaseout of income taxes on retirement income started in 2019, meaning that pension and annuity income on adjusted gross income of up to $75,000 for singles (or $100,000 for couples) has hit 28% exemption — doubling this year and continuing to rise year by year until hitting a full 100% in 2025.

For such a small state, Delaware offers taxpayers huge benefits in tax season. In addition to tying for the sixth-lowest U.S. property tax, it also has low income tax rates, does not tax Social Security income, and has no inheritance tax (and no estate tax below $11.6 million in value) — all of which make a hugely popular destination for retirees. Retirees should also take advantage of a pension exclusion that offers a deduction up to $12,500 on income from pensions or retirement savings accounts for residents 60 and older.

Related: Most and Least Tax-Friendly States for Retirees

Sunshine and beautiful beaches aren't the only reason snowbirds descend every winter. Establish residency by crossing the 183-day mark and become eligible to enjoy no income tax, zero taxes on Social Security and retirement earnings, certain investment earnings, and generally lower taxes. Consult a tax professional before moving, though. There are may be other requirements.

Related: 40 RV Retirement Spots for Snowbirds

Another popular state for retirees, the Peach State offers a number of money-saving opportunities. Georgia does not tax Social Security retirement benefits, and there's no estate or state inheritance tax. Additionally, individuals 64 and older can deduct up to $65,000 (it's $130,00 if married) on retirement income. Taxpayers who are 62 and older, or permanently and totally disabled, also may be exempt from tax on most types of retirement income up to $40,000.

While most of us just daydream about a trip to Hawaii, those lucky enough to live there can save money at tax time if they help care for the island's lush landscape. Taxpayers may deduct up to $3,000 for each tree on their property deemed "exceptional" by a certified arborist who establishes the tree worthy of preservation based on rarity, age, location, size or aesthetics. The deduction goes toward maintaining the tree, but can be taken only once every three consecutive tax years.

To help offset sales tax and help families buy groceries, Idaho introduced a grocery credit in 1965. The grocery credit goes up to $120 per person, based on income and age, and can go toward stocking up on Idaho spuds or anything else on the grocery list. Taxpayers who don't wish to get the credit can donate it to the Cooperative Welfare Fund, a state trust fund for public assistance.

Another retiree-friendly state, Illinois offers full deductions for pension income, Social Security, and retirement savings account income. Taxpayers with children in kindergarten to 12th grade at a public or private school may also qualify for a tax credit for a portion of expenses. Low- and some middle-income families and individuals may also qualify for the state's Earned Income Tax Credit, which can equal 18% of their federal EIC.

Related: 20 Valuable Tax Breaks for Seniors

Small-business owners may be able to claim numerous business-related expenses as deductions or write-offs, but must file additional schedules. One of the most common is the Schedule C Business Deductions, which includes things such as promotional materials, office supplies, and home office deductions. They can also claim adjustments to gross or total income on federal taxes, including half of the self-employment taxes paid, retirement accounts, and health plans.

Iowa taxpayers can deduct the first $3,439 they contribute to college savings, per person rather than per child, from taxable income — so a married couple with two children could deduct up to $13,756 in College Savings Iowa contributions on their state taxes by having four accounts.

Social Security income is exempt for retirees with an Adjusted Gross Income below $75,000, and public pension income. (Other forms of retirement income, such as a 401(k) or IRA, are not.) To help lower-income seniors, the state offers tax relief programs such as the homestead refund for individuals born before Jan. 1, 1965, with a total household income of $36,300 or less. The Safe Seniors program also refunds 75% of paid property taxes for those over 65 with a household income of $20,300 or less.

Related: 9 Common Tax Mistakes Retirees Make

New as of 2020 for filers who have a "micro-business" or take part in the “gig” economy by (for example) driving for Lyft or delivering for Instacart: You no longer need to file "tangible personal property" tax returns for stuff with a value of $1,000 or less.

Got kids? Taxpayers with children in kindergarten through 12th grade in qualifying public and nonpublic schools — and even those that are homeschooled — could save a bundle on tuition, textbooks, uniforms, and other school expenses. Residents may be able to deduct half of the associated costs up to $5,000 for each dependent. Tax credits are also available for child care expenses, as well as child care providers and businesses donating to those organizations. And a break for virtual education coaching was added for 2021 because of the coronavirus pandemic.

Renters and property owners may be eligible for tax relief by meeting certain requirements for the Property Tax Fairness Credit — though many don't realize they qualify. Replacing the more limited Circuit Breaker credit, it is available to residents with adjusted gross income up to $42,000 if single or $67,000 if married filing jointly, head of household or qualifying widow(er). If real estate taxes were more than 5% of total income or total rent was more than 33.3%, you may be entitled to up to $750 or $1,200 if 65 years or older.

Related: These Tax Moves Are Most Likely to Trigger an Audit

Residents can use part of their state refund to donate to the Chesapeake Bay and Endangered Species Fund, the Developmental Disabilities Services and Support Fund, or the Maryland Cancer Fund (or all three), and deduct the amount from their federal tax the following year.

Taxpayers may be eligible for numerous tax exemptions and deductions. Some of the more common include $700 for each taxpayer age 65 or older, and $1,000 for each dependent; less common ones include $2,200 for each legally blind taxpayer or spouse.

To help offset heating costs for low-income residents, there's a home heating credit. Eligible residents may get a credit anywhere from $492 to upward of $1,355 depending on their income level and exemptions. It's important to submit the required form before Sept. 30.

Related: Crazy-Sounding Tax Deductions That Are Actually Legit

Taxpayers saving for college can take advantage of a state tax deduction or credit. Individual taxpayers may deduct up to $1,500 for contributions to qualified plans, while married couples filing jointly can deduct up to $3,000.

Taxpayers whose homes are damaged by hurricanes or flooding may be able to open a catastrophe savings account that can be used tax-free to pay for eligible expenses. Homeowners can put in up to $2,000 if their home insurance deductible is $1,000 or less. If the deductible is over $1,000, they can contribute up to $15,000 or twice the deductible, depending on which is less.

Residents may be able to save a bundle come tax time from an extensive list of available tax credits that help reduce tax bills dollar for dollar (as opposed to deductions that just reduce the amount of taxable income). Many credits involve making donations to charitable causes, such as eligible agencies that help at-risk children, domestic violence victims, pregnant mothers, and even local sports organizations.

Taxpayers can save with tax credits for a range of expenses, such as those related to adoption, alternative energy, dependent care, and college contributions. The state also offers an Elderly Homeowner/Renter Tax Credit that helps renters and homeowners 62 and older with less than $45,000 in gross household income.

Related: 14 Tax Deductions That Parents and Grandparents Shouldn't Overlook

To encourage careers in farming, Nebraska offers a Beginning Farmer/Rancher program tax incentive. Qualifying farmers — who don't have to be young to be eligible — may be exempted from personal property tax up to $100,000 for agricultural land, and up to $500 credit for qualified financial management classes. Taxpayers that help beginning farmers with such things as land, livestock, and equipment may also be eligible for tax credits.

Nevada is another state with no income tax, which means residents aren't taxed on winnings at the state's casinos (though they are responsible for federal taxes on those).

Wages and salaries aren't taxed by New Hampshire (there's also no sales tax) but those getting income from interest and dividends have to pay a 5% flat tax on earnings above $2,400 individually or $4,800 married filing jointly. There are additional exemptions of $1,200 for residents 65 or older; blind; or disabled and unable to work but under 65.

While a number of federal deductions are not allowed on the New Jersey state tax return, such as moving expenses, mortgage interest, IRA contributions and employee business expenses, Garden Staters still have available deductions in medical expenses that exceed 2% of income, including doctor's visits and dental care, and self-employed health insurance. In some cases homeowners and renters may qualify for a property tax deduction or credit for up to 100% of property taxes or $15,000, whichever is less (and for tenants, 18% of rent paid during the year).

Related: The Best and Worst States for Middle-Class Taxpayers

If you're lucky enough to live to 100 or older in the Land of Enchantment and no one is claiming you as a dependent, you're exempt from state income tax. And if you're married at that age, you can exempt half of all community income and all of your income. Younger folks still may be able to make the most of numerous tax credits.

The Empire State offers taxpayers a lengthy list of tax credits that could come in handy. Popular ones include a college tuition credit up to $400 and a child and dependent care credit. Volunteer firefighters and ambulance workers can also claim $200 (or $400 for married couples when both volunteer), and individuals and families living in New York City may also be eligible for additional credits.

In recent years, North Carolina did away with several tax credits, but as long as a taxpayer continues to meet the eligibility requirements for those repealed credits they can still benefit from them. Additionally, the state allows tax credits for each dependent child. If you happened to rehabilitate a historic structure or mill facility, you may also be eligible for tax credits.

Related: Strange But True Tax Laws From All 50 States

Taxpayers may be eligible for a number of tax credits, including a popular marriage credit. If an individual takes care of a family member who is disabled or age 65 or older, they may be eligible for a credit up to $2,000 per family member (with a total limit of $4,000) for qualified care expenses

A tax reform package passed a few years back lets small-business owners deduct 100% of business income up to $250,000. Taxpayers saving for college can deduct up to $4,000 per person by contributing to the state's College Savings Plan.

Related: 40 Essential Tax Tips for Small-Business Owners

Oklahoma's another state encouraging historic preservation with tax credits — in this case, for 20% of qualified rehab and preservation expenses. And uniquely, it's offering a $5,000 to aerospace engineers with the right degree, in an effort to keep the industry thriving in the state.

Related: Where Your Federal Income Tax Money Really Goes

While the Beaver State often gets dinged for having some of the country’s highest income tax rates (4.75% to 9.9%), consumers there do catch a break in that there is no sales tax. Residents looking to buy their first home may also be eligible for the state’s First Time Home Buyer Savings Account program that lets individuals sock away up to $5,000 ($10,000 for joint filers) and subtract that amount from their taxable income.

Taxpayers are likely keenly aware that flat-tax Pennsylvania doesn't allow many of the deductions available on the federal return — but there are a few, including employment-related expenses that aren't reimbursed by an employer, contributions to medical and health savings accounts, and contributions to 529 college savings accounts up to $15,000 per student or $30,000 per year for married couples. 

Taxpayers saving for college should consider taking advantage of the state's 529 College Savings plans. Not only will their contributions grow free of state and federal tax, but Rhode Island allows taxpayers to deduct $500 per year for individuals and $1,000 for married couples filing jointly.

Related: What You’d Be Paying in Taxes in 34 Other Countries

There are a range of tax credits worth exploring, including refundable credits for up to $11,000 for parents of qualifying exceptional needs children paying tuition to an eligible school and up to $10,000 for the first 500,000 pounds of milk a taxpayer sells below its production price. Nonrefundable credits go broader, with up to $1,000 for taxpayers who retrofit their home against hurricanes and floods or even $50 for couples who complete a “premarital preparation course” before applying for a marriage license. You can even get 20% off an investment that helps make movies in the state.

After benefiting from the lack of an income tax, South Dakotans can't deduct state income tax from federal returns but can still save by deducting state and local sales tax. Individuals and businesses can also benefit from a tax credit for donating to Scholarship Granting Organizations that help students in nonpublic primary and secondary schools.

Taxpayers don't have to pay a state "hall" tax on income from salaries and wages, and have finally seen the completion of a six-year phaseout on income from interest and dividend earnings too. And people 65 and older with an income of $37,000 or less ($68,000 for joint filers), are also exempt. Starting last year, anyone age 100 or older is also exempt.

Related: 23 Tax Horror Stories That Will Make You Fear the IRS

No income tax is collected from Texans, who can save further by taking the state and local tax deduction (aka SALT) on their federal returns, though the deduction is now capped at $10,000 and may not be worthwhile for many after the federal tax reform law increased the standard deduction.

Taxpayers making a sacrifice to help those in need can be helped in turn by the live organ donation expenses credit of up to $10,000 for certain expenses (such as travel, lodging, or lost wages) when donating certain organs, including bone marrow. The state also offers credits for things such as retirement income, solar projects, and educational savings plans.

Related: 16 Steps to Get Organized Before Tax Season

Vermont has one of the higher income tax rates in the country, but residents can still save thanks to a number of tax credit programs. Among the more popular is one helping working people offset the cost of caring for children and other dependents. The state also offers a rebate program to help with a percentage of rent paid for households where the annual income doesn't exceed $47,000.

Farmers who have had a particularly abundant year may want to consider donating excess food crops to a nonprofit food bank and reaping the Food Crop Donation Credit allows credit equal to 30% of the fair market value for the donated food up to $5,000. Non-farmers can take advantage of other deductions, including for child and dependent care.

Related: 11 Situations Where It's Probably a Bad Idea to Do Your Own Taxes

One more state that doesn't collect income tax, Washingtonians should be sure investigate whether it is worthwhile to deduct their pricey state and local sales taxes on federal returns.

Taxpayers 65 or older, or who are permanently and totally disabled, may subtract up to $8,000 from their federal adjusted gross income for West Virginia tax purposes.

Low- to moderate-income working families may be eligible for tax relief from the Wisconsin Earned Income Tax credit (in addition to the federal credit). Individuals or married couples age 62 or over, or the disabled, may also find some relief with the state's Homestead Credit.

Related: 11 Places Where the Rich Hide Money From the IRS

Wyoming doesn't collect state income tax or tax intangible assets such as stocks and bonds. And retirees don't have to pay tax on Social Security, withdrawals from a 401(k), or other types of retirement income.