Cheapest States To Live In for 2021

A Credit Karma Study

Gaby Lapera and Andrew Depietro – February 8, 2022

Thinking about your next big move? There are a lot of factors that go into deciding where you want to live. But if the most important thing to you is cost, then read on to see what states were the cheapest and most expensive in 2021, according to Credit Karma’s study.

Credit Karma created a methodology to identify the cheapest states in 2021 using a variety of factors, including home value, average rent, overall cost of living, taxes and a few other specific cost-of-living indexes. (Click here for the full methodology.)

Here’s a sneak peek of our rankings for the cheapest states to live in, ranked from cheapest to more expensive.

  1. Mississippi
  2. Arkansas
  3. Alabama
  4. West Virginia
  5. Ohio

And the most expensive states are (in order of most expensive to cheaper) …

  1. Hawaii
  2. California
  3. Massachusetts
  4. New York
  5. New Jersey

Read on to get more context on the study, including the factors we considered to determine the cheapest states.

Overall cheapest and most expensive states to live in for 2021

In our study, the lower the score, the cheaper the state. See the full list of how each state ranks in terms of cheapness:

Rank State Overall score Overall cost of living Median monthly housing costs Median annual real estate taxes Sales tax
1 Mississippi 1.97 1 3 6 22
2 Arkansas 2.07 5 2 3 18
3 Alabama 2.08 4 6 1 3
4 Oklahoma 2.16 3 7 11 6
5 Ohio 2.23 13 14 29 13
6 West Virginia 2.25 15 1 2 14
7 Missouri 2.35 8 12 17 4
8 Louisiana 2.43 16 15 5 5
9 New Mexico 2.57 9 13 15 9
10 Tennessee 2.6 7 8 8 22
11 Montana 2.62 28 24 23 1
12 South Dakota 2.66 27 18 27 6
13 Kentucky 2.69 18 5 9 14
14 Indiana 2.7 10 4 7 22
15 Georgia 2.73 6 22 22 3
16 Kansas 2.75 2 19 26 18
17 Wyoming 2.89 21 27 10 3
18 Iowa 2.9 11 10 30 14
19 Nebraska 3.03 17 20 34 11
20 Michigan 3.05 12 16 31 14
21 South Carolina 3.11 22 9 4 14
22 North Carolina 3.17 23 17 16 7
23 Idaho 3.17 19 11 12 14
24 North Dakota 3.32 25 23 25 8
25 Wisconsin 3.44 24 25 38 8
26 Texas 3.51 14 34 41 16
27 Delaware 3.85 35 33 13 1
28 Arizona 3.87 32 26 14 12
29 Utah 3.95 26 31 20 15
30 Illinois 3.99 20 36 46 16
31 Virginia 3.99 31 39 28 10
32 Pennsylvania 4 33 28 36 14
33 Florida 4.04 29 29 24 14
34 Colorado 4.22 34 38 21 2
35 Minnesota 4.28 30 32 32 21
36 Maine 4.51 40 21 33 11
37 Nevada 4.59 36 30 18 20
38 New Hampshire 4.7 37 43 48 1
39 Vermont 5.25 41 35 44 14
40 Oregon 5.27 46 37 35 1
41 Maryland 5.59 44 44 40 14
42 Rhode Island 5.95 42 40 43 22
43 Alaska 6.05 45 42 39 1
44 Washington 6.05 38 41 37 18
45 New York 6.42 49 46 47 3
46 Connecticut 6.47 43 45 49 17
47 New Jersey 6.53 39 50 50 19
48 Massachusetts 7.06 47 47 45 16
49 California 8.22 48 48 42 23
50 Hawaii 10.04 50 49 19 3

Hawaii is by far the most expensive state, coming in last in almost every category in this study. There are a few reasons for this, but the primary factor is location, location, location. Hawaii is geographically isolated, and many goods must be imported across a huge distance, which is very costly. On top of that, real estate is expensive. The islands that make up the state are small, reducing supply, and demand is high for gorgeous property.

Coastal states tended to be more expensive overall, while central and Southern states tended to be cheaper. Check out the map below:

Mississippi came in first in terms of cheapness, largely because of its low cost-of-living metrics and inexpensive real estate.

States with the cheapest housing costs in 2021

The Zillow Home Value Index provided the estimated typical price for homes, and a Statista dataset showed the average monthly apartment rent.

Lowest estimated typical home values Highest estimated typical home values
West Virginia – $119,026 Hawaii – $743,125
Mississippi – $142,485 California – $700,828
Arkansas – $151,472 Washington – $529,768
Oklahoma – $152,819 Massachusetts – $525,744
Iowa – $167,640 Colorado – $501,345

Lowest average monthly rent Highest average monthly rent
West Virginia – $780 Hawaii – $1,911
Arkansas – $781 California – $1,776
South Dakota – $807 New Jersey – $1,532
Iowa – $831 Massachusetts – $1,526
North Dakota – $845 Maryland – $1,507

Credit Karma used data from the U.S. Census Bureau’s 2019 American Community Survey to find the states with the lowest median monthly housing costs. These costs include items like mortgage payments, real estate taxes, insurance, utilities and condo fees.

Lowest median monthly housing costs Highest median monthly housing costs
West Virginia – $1,050 New Jersey – $2,465
Arkansas – $1,089 Hawaii – $2,418
Mississippi – $1,147 California – $2,357
Indiana – $1,148 Massachusetts – $2,225
Kentucky – $1,178 New York – $2,155

A lot of the usual suspects make the list for most expensive states in terms of housing prices: Hawaii, California, New Jersey and Massachusetts. The same is true for the cheapest states. West Virginia, Mississippi, Arkansas and Iowa show up repeatedly throughout the study with low costs.

States with the lowest taxes in 2021

The study methodology incorporated two types of taxes: property and sales.

There are several states with no sales tax. They are …

Interestingly, a couple of states that tend to a have higher cost of living also have lower sales taxes, including the following:

  1. Colorado: 2.9%
  2. Hawaii: 4%
  3. New York: 4%

There were a few surprises for sales tax. Some of the overall cheapest states, like Mississippi and Tennessee, had higher sales taxes. The states with the highest sales tax rates are …

  1. California: 7.25%
  2. Mississippi: 7%
  3. Tennessee: 7%
  4. Indiana: 7%
  5. Rhode Island: 7%

One thing to note: Sales taxes can vary on the local level since municipalities can impose additional sales taxes on top of the state baseline sales tax.

Instead of looking at the actual property tax rates, we looked at the median amount paid in real estate taxes for owner-occupied units with mortgages using data from the 2019 American Community Survey. This gives a better understanding of how much a person might expect to pay in property tax while taking into account the overall cost of housing in any given state.

Lowest median annual real estate taxes Highest median annual real estate taxes
Alabama – $679 New Jersey – $8,490
West Virginia – $848 Connecticut – $6,002
Arkansas – $936 New Hampshire – $5,891
South Carolina – $1,083 New York – $5,758
Louisiana – $1,105 Illinois – $4,824

For illustrative purposes, we’ve included a table below with the average effective property tax rates sourced from the nonprofit Tax Foundation. It helps explain how Illinois landed on the list above. Illinois has the second-highest average effective property tax, which offsets the below-average typical home values. Interestingly, Hawaii has the lowest average effective property tax.

State Ranking Avg. effective property tax rates
Hawaii 1 0.31%
Alabama 2 0.37%
Louisiana 3 0.51%
Wyoming 3 0.51%
Colorado 4 0.52%
South Carolina 5 0.53%
West Virginia 5 0.53%
Nevada 6 0.56%
Utah 6 0.56%
Delaware 7 0.59%
New Mexico 7 0.59%
Arizona 8 0.60%
Arkansas 9 0.61%
Mississippi 10 0.63%
Tennessee 10 0.63%
Idaho 11 0.65%
California 12 0.70%
Montana 13 0.74%
Kentucky 14 0.78%
North Carolina 14 0.78%
Indiana 15 0.81%
Oklahoma 16 0.83%
Virginia 17 0.84%
Washington 18 0.84%
Florida 19 0.86%
Georgia 20 0.87%
North Dakota 21 0.88%
Oregon 22 0.91%
Missouri 23 0.96%
Alaska 24 0.98%
Maryland 25 1.01%
Minnesota 26 1.05%
Massachusetts 27 1.08%
South Dakota 28 1.14%
Maine 29 1.20%
Kansas 30 1.28%
New York 31 1.30%
Michigan 32 1.31%
Rhode Island 33 1.37%
Iowa 34 1.43%
Pennsylvania 35 1.43%
Ohio 36 1.52%
Wisconsin 37 1.53%
Nebraska 38 1.54%
Texas 39 1.60%
Connecticut 40 1.73%
Vermont 41 1.76%
New Hampshire 42 1.89%
Illinois 43 1.97%
New Jersey 44 2.13%

States with the lowest cost-of-living indexes in 2021

Credit Karma used the Missouri Economic Research and Information Center for the cost-of-living datasets. This study used the following cost-of-living indexes: Overall, grocery, transportation, housing, utilities, health and miscellaneous.

The overall cost-of-living category combines and weights the other indexes. Here are the states with the highest and lowest overall cost of living.

Lowest overall cost of living Highest overall cost of living
Mississippi Hawaii
Kansas New York
Oklahoma California
Alabama Massachusetts
Arkansas Oregon

Mississippi makes multiple appearances as the state with the lowest cost of living across a few indexes, including housing, transportation and miscellaneous. This helps explain why, according to our study, Mississippi is the cheapest state.

Hawaii tops almost every index for cost of living as the most expensive state, except in terms of healthcare. That dubious honor goes to Alaska — likely because of the difficulty of getting supplies and doctors there.

The table below allows you to sort by all the cost-of-living indexes included in this study.

State Overall COL Grocery COL Housing COL Utilities COL Transport COL Health
COL
Misc. COL
Mississippi 1 2 1 12 1 8 2
Kansas 2 8 3 31 14 32 1
Oklahoma 3 11 5 20 9 17 5
Alabama 4 18 2 33 7 6 10
Arkansas 5 4 6 16 3 3 18
Georgia 6 16 4 13 11 16 12
Tennessee 7 10 14 17 2 5 6
Missouri 8 13 9 23 8 11 7
New Mexico 9 12 16 11 13 24 3
Indiana 10 6 12 26 22 9 11
Iowa 11 19 7 21 23 33 21
Michigan 12 9 10 32 29 18 9
Ohio 13 1 8 18 21 19 19
Texas 14 3 18 35 6 10 14
West Virginia 15 22 11 7 15 4 32
Louisiana 16 14 21 3 10 26 17
Kentucky 17 5 13 34 25 2 31
Nebraska 18 23 19 6 24 30 15
Idaho 19 7 26 1 36 12 8
Illinois 20 21 20 22 35 29 16
Wyoming 21 32 15 2 20 23 35
South Carolina 22 33 17 41 12 13 28
North Carolina 23 20 22 28 16 39 25
Wisconsin 24 25 23 29 17 40 26
North Dakota 25 30 25 14 31 45 13
Utah 26 17 27 19 32 7 22
South Dakota 27 26 35 10 4 14 4
Montana 28 31 31 5 18 28 23
Florida 29 36 29 42 28 22 20
Minnesota 30 34 24 25 26 41 37
Virginia 31 15 33 27 5 31 24
Arizona 32 27 32 37 27 20 27
Pennsylvania 33 37 28 43 38 15 29
Colorado 34 28 36 4 34 25 34
Delaware 35 46 30 24 44 36 40
Nevada 36 39 38 9 46 35 30
New Hampshire 37 24 34 44 19 46 43
Washington 38 40 37 15 47 48 41
New Jersey 39 38 43 36 33 21 36
Maine 40 29 44 38 30 44 39
Vermont 41 45 41 45 45 27 33
Rhode Island 42 41 39 46 37 37 49
Connecticut 43 35 42 48 41 43 47
Maryland 44 43 45 39 42 1 38
Alaska 45 49 40 49 43 50 45
Oregon 46 42 47 8 48 47 48
Massachusetts 47 47 46 40 39 49 46
California 48 44 48 47 49 38 42
New York 49 48 49 30 40 34 44
Hawaii 50 50 50 50 50 42 50

Tips for choosing a place to live

Choosing a place to live is a highly personal decision, and there are a lot of factors that go into it besides purely financial ones. For example, maybe you live in a place with a high cost of living, but you’re also close to your friends and family. Or maybe you work in an industry that only exists in certain regions. Or maybe you just really love the school district your kids are in.

If you’re trying to make a decision about where to live, you could try replicating this study in miniature with things you care about. For example, say you’re interested in California, Colorado and Virginia as potential options. You would add each state to the spreadsheet as rows, then add the things you care about in the columns.

The variables could be anything — they could be factors with objective numbers, like the average cost of a house in each state or crime rates in the area you’re interested in. You could even use this article or the sources cited in it to help out with cost-of-living indexes.

You could also include some more subjective variables, like proximity to family or access to hobbies. It would be up to you to decide how many points to give these “softer” categories.

Once you have all the variables and their values added, give each one a score from one to 100, with 100 being the best and one the worst.

Here’s an example.

State Housing cost Housing score Friends & family score
Calif. $500,000 1 75
Colo. $325,000 50 0
Va. $225,000 100 25

Now it’s time to weight them according to their importance to you. For example, if you really care about taxes and don’t care too much about school quality, you would weight taxes more heavily. In order to weight the variables, just multiply the score by the weight as a percentage. Remember that your total weighting across all categories should add up to 100%, which in decimal format is 1.00. Take a look below.

State Housing score Housing score weighting Friends & family score Friends & family score weighting Total
Calif. 1 x 0.3 = 3 75 x 0.7 = 52.5 3 + 52.5 = 55.5
Colo. 50 x 0.3 = 15 0 x 0.7 = 0 15 + 0 = 15
Va. 100 x 0.3 = 30 25 x 0.7 = 17.5 25 + 17.5 = 42.5

Once you’ve done all the weighting, you just add up the weighted scores and see which one had the most total points. In the example above, California came in first place.

Ultimately the decision is up to you. Some data and your heart could give you the answers you’re looking for.

Methodology

To identify the cheapest states to live in, we analyzed all 50 U.S. states using the criteria below. States were given a score for each factor. Scores were combined and states were then ranked by final scores.

  1. Overall cost of living index, sourced from the Missouri Economic Research and Information Center for Q2 2021
  2. Cost of groceries index, sourced from the Missouri Economic Research and Information Center for Q2 2021
  3. Cost of utilities index, sourced from the Missouri Economic Research and Information Center for Q2 2021
  4. Cost of transportation index, sourced from the Missouri Economic Research and Information Center for Q2 2021
  5. Cost of health index, sourced from the Missouri Economic Research and Information Center for Q2 2021
  6. Cost of miscellaneous items index, sourced from the Missouri Economic Research and Information Center for Q2 2021
  7. Zillow Home Value Index (ZHVI), a smoothed, seasonally adjusted measure of the typical home value, for all homes
  8. Average monthly apartment rent in the U.S. in February 2020 and February 2021, sourced from Statista
  9. Median monthly housing costs, sourced from the U.S. Census Bureau’s 2019 American Community Survey, five-year estimates.
  10. Median annual real estate taxes, sourced from the U.S. Census Bureau’s 2019 American Community Survey, five-year estimates.
  11. Tax Policy Center’s State Sales Tax Rates for 2021

Sources