What Is The Cost Of Living In Arizona Vs. Indiana?

Cost of living is a major factor that people use to help them decide whether they should live in one place versus another. When it comes to Arizona vs. Indiana, both states have much to offer potential residents. Known for its colorful sunsets, year-round sunshine, explosive population growth, and extensive desert landscapes, Arizona attracts people from all over.

Whereas, Indiana offers all four seasons, excellent universities, low crime rates, and friendly people. But, how do these two states compare in terms of cost of living?

The cost of living index in Arizona is 102.2, meaning it is only about 2% more expensive to live in Arizona than the national average (100). Indiana, on the other hand, has a cost of living index of 82.1, so it is significantly more affordable than both Arizona and the national average. The median price of a home in Arizona is $349,300, which is about 20% higher than the national average of $291,700. Meanwhile, the median home price in Indiana is just $186,100 – a whopping 47% less than Arizona.

Aside from median housing prices, let’s examine how the cost of living compares in Arizona vs. Indiana.

When you evaluate the fact that the median home price in Arizona is nearly $350,000, it is substantially more expensive to purchase a home here than in Indiana. With Indiana’s median home price of around $186,000, you’d be looking at spending about 88% more for a home in Arizona than Indiana.

Although housing prices have skyrocketed in Arizona over the last year, sales are starting to drop. With a decrease in demand, the prices may follow as the supply of homes for sale increases. Not to mention, mortgage rates are the lowest they’ve ever been so this is, arguably, the best time to buy a home in Arizona.

For a couple of months in the midst of the pandemic, housing prices did drop all across the U.S. However, they recovered fast and since the middle of 2020 they’ve been skyrocketing. We are now seeing homes being sold at higher prices than ever before, and this is certainly the case for Indiana. Though, even with low interest rates, fewer people are able to even consider buying homes because tens of millions have been unemployed for over a year and a half.

Even if someone can afford a home in Indiana because of the record-low interest rates, homeowners insurance will be pricey because of the increased home prices. While home prices are up all across the country, it still remains more affordable to buy a home in Indiana than Arizona.

Currently, Phoenix, Arizona has one of the hottest real estate markets in the country. It has recovered from the slump that resulted from the COVID-19 pandemic and the demand for homes has reached record heights. Homes are selling fast, with about 50% of them selling for more than the asking price. The same can be said for many other cities in Arizona as well.

Though, more affordable housing is still a significant advantage of settling in Indiana over Arizona. In fact, it’s highly unlikely that you’ll spend over the national average for a home in Indiana. When you consider the table above, it’s easy to see how housing costs in Indiana are between 40 and 50 percent cheaper than Arizona.

With a statewide average rent of $1,052, Arizona is considered to be a relatively affordable destination for renters. Though, your actual monthly rent will vary based on the city you live in in Arizona. For example, Scottsdale is the most expensive Arizona city to rent with an average rent of $1,914 and the most affordable city in Arizona for renters is Tucson with an average rent of $1,115.

With that said, the following table displays the average monthly rent for some of the various cities in Arizona:

Indiana, on the other hand, enjoys even cheaper rental rates. In fact, the state is among twenty-one states that have average rent prices under $1,000 a month. With a statewide average monthly rent of just $826, Indiana is the twelfth most affordable place for renters. In general, states with the lowest rent prices tend to also have the lowest overall cost of living – and this is certainly the case for Indiana.

Examine the following table for a more well-rounded understanding of the average rental prices you can expect in some of Indiana’s major cities:

In recent years, Arizona has been one of the fastest-growing states and the low taxes may be one of the main factors that attract people to the state. Income tax rates in Arizona are below average and, like the federal income tax, the rates are based on income brackets. Arizona has four total income tax brackets, with rates that range from 2.59% to as much as 4.50% for the state’s highest income earners. This means that lower brackets pay lower rates and higher brackets pay higher rates.

Unlike Arizona, Indiana has a flat state income tax and rates do not vary based on income level. The rate is 3.23%, meaning all Indiana residents must pay the same percentage of their income in state taxes. However, rates increase depending on where you live in Indiana, as counties levy their own income taxes. These extra county income tax rates range from 0.50% to 2.90%, which are paid in addition to the state rate of 3.23%.

In Arizona, you must pay both state and local taxes on purchases. The statewide sales tax rate is 5.60% but when you factor in all the additional local taxes, Arizona’s average sales tax rate is 8.4%. This rate is the 11th highest in the country.

Unlike Arizona and most other states, Indiana does not have any local sales tax rates. This means that wherever you are in Indiana, you pay the same 7% sales tax rate. The rate applies to goods or tangible property, but not to most services. For example, many types of food are exempt from sales tax.

The average effective property tax rate (meaning the total taxes paid as a percentage of home value) in Arizona is 0.62%. This rate varies based on the city and county you live in, but no Arizona county has an effective property tax rate higher than 1.01%, which is 0.06% lower than the national average of 1.07%. While the sales taxes in Arizona may be high, their property taxes are among the lowest in the country.

Indiana residents also enjoy property taxes that are relatively low, especially when compared to other states in the region. The average effective property tax rate in Indiana is only slightly higher than Arizona’s at 0.81%, but still significantly lower than the national average. Homeowners in the state pay an average of $1,263 in property taxes each year.

Whether you’re moving to Arizona or Indiana, transportation is another major expense to consider. At the state level, Arizona does not have public transportation. Instead, it is handled by the individual agencies around the state. If you live in one of Arizona’s major metropolitan areas, you can cut costs by getting rid of your car and relying on public transit.

The same is the case for Indiana. Though, being a relatively rural state, you want to consider keeping your car for your commute to work. Of course, this will ultimately contribute to higher transportation costs. The transportation cost index in Arizona is 107, which is quite a bit higher than Indiana’s transportation cost index of 85.4.