Methodology

TaxGrader combines data from multiple government sources to provide a comprehensive picture of the tax landscape. This page explains how we source, process, and present that data.

Primary Data: IRS Statistics of Income

The IRS Statistics of Income (SOI) division publishes detailed data on individual income tax returns, broken down by state, income bracket, filing status, and deduction type. This is our primary data source for state-level tax analysis.

Key SOI data we use includes:

• Total returns filed and aggregate adjusted gross income (AGI) by state
• Average tax liability by state and income bracket
• Deduction usage rates (standard vs. itemized, SALT, mortgage interest, charitable)
• Earned Income Tax Credit (EITC) and Child Tax Credit utilization
• Self-employment income distribution

Data lag: IRS SOI data is typically published 1 to 2 years after the tax year. We clearly label the tax year for all SOI data shown on the site.

Tax Bracket Data

Federal tax brackets are updated annually by the IRS through Revenue Procedures. We source bracket data directly from these publications (e.g., Revenue Procedure 2024-40 for 2025 brackets). Our calculators apply the standard progressive tax formula where each bracket applies only to income within that range.

State Tax Data

State income tax rates, sales tax rates, and property tax data come from the Tax Foundation, which compiles state tax information annually. We cross-reference this with state revenue department publications where available.

Economic Context: FRED

Federal Reserve Economic Data (FRED) provides macroeconomic context for tax analysis, including:

• Federal revenue as a percentage of GDP
• Individual income tax revenue trends
• Median personal income
• Consumer Price Index (for inflation-adjusted comparisons)

Calculator Methodology

Our tax calculators apply standard IRS formulas using published tax brackets, deduction amounts, and rate schedules. Calculators are designed to provide reasonable estimates for typical tax situations. They do not account for all possible credits, phase-outs, alternative minimum tax, or state-specific rules.

Scoring Approach

When we rank or compare states, we use a transparent methodology:

• Income tax burden: Based on top marginal rate and average effective rate from IRS SOI data
• Sales tax burden: Combined state and average local sales tax rates from Tax Foundation
• Property tax burden: Average effective property tax rate from Tax Foundation

All rankings show the specific metric used so readers can evaluate the comparison for themselves.

Data Freshness

We update data on the following schedule:

• Tax brackets: Updated annually when the IRS publishes new Revenue Procedures (typically October/November)
• State tax rates: Updated annually with Tax Foundation publications
• IRS SOI data: Updated when new annual releases become available
• FRED data: Updated quarterly

Questions About Our Methodology

If you have questions about how we source or present data, visit our contact page.