Is it better to live in a state with no income tax?
The Takeaway. States without income taxes may save you a lot of money when it's time to file taxes, but there may be hidden costs of living in such states, like higher sales and property taxes. Before moving, it's important to consider the full picture to better understand the potential impact on your finances.
Con: Lower Infrastructure and Education Spending
Other states with no income tax revenue may lower spending in other areas, such as infrastructure. As a resident, you'll have to decide whether that tradeoff is worth it.
Yes and no. The more you earn and the higher the tax rate in your state, the more you can potentially save by moving to an income tax-free state. However, moving to a state with no income tax isn't always beneficial.
A California household earning the median income of $91,905 would save nearly $2,843 a year by moving from California to a no-income-tax state. But there's more to the calculation, experts say, including property taxes, real estate prices — not to mention less-tangible quality of life measures.
The analysis also explored how each state's tax-friendliness rating related to its population growth from 2021 to 2022. (Learn more in the Methodology section.) Nevada is the most tax-friendly state, where residents pay $2,949. Illinois is the least tax-friendly state; there, families pay $12,472 in annual taxes.
As of 2023, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.
- Alaska.
- Florida.
- Nevada.
- South Dakota.
- Tennessee.
- Texas.
- Washington.
- Wyoming.
Florida primarily makes up for its lack of an income tax with its sales tax, which generates around 80% of the state's revenue. Florida's sales tax is imposed on services and goods, and both the state and county levy a certain percentage.
There is no income tax on wages in this state, making it one of the states with the lowest taxes. Therefore, the Tennessee income tax rate is 0%. It does have, however, a flat 1 to 2% tax rate that applies to income earned from interest and dividends. Tennessee levies tax on other items, outside of income.
Instead of collecting income taxes, Texas relies on high sales and use taxes. When paired with local taxes, total sales taxes in some jurisdictions are as high as 8.25%. Property tax rates in Texas are also high. In fact, only a handful of states have higher property tax rates.
What states have the cheapest property tax?
- Hawaii has the lowest property tax rate in the U.S. at 0.29%. ...
- Alabama is generally one of the more affordable states in the country. ...
- Colorado has the third-lowest property tax rate at 0.51%. ...
- Nevada has the fourth-lowest property tax rate in the nation (0.55%).
Some states with a lot of commuters have reciprocity agreements, so you're only taxed by your state of residence even if you cross state lines to go to work. Other states tax nonresidents who physically work within their borders but they usually receive a tax credit from their home state to avoid double taxation.
What State Has the Highest Taxes? The state with the highest taxes is New York. New York is one of the states with highest income tax rates as well as high sales tax rates, high property taxes, and high excise taxes.
1. Iowa. Iowa ranks as the number one state to retire to. It offers an affordable cost of living and home prices and a strong economy, making it an attractive place to make retirement savings last longer.
Kentucky, New Jersey, and Mississippi top the list of the worst places to retire in the U.S. in 2024, according to a new survey from WalletHub. The study compared the 50 states across 46 key indicators, from tax rates and the cost of living to access to quality medical care and fun activities.
Oregon doesn't have a general sales or use/transaction tax. However, Oregon does have a vehicle use tax that applies to new vehicles purchased outside of the state. The tax must be paid before the vehicle can be titled and registered in Oregon.
- Claim Your Home Office Deduction. ...
- Start a Health Savings Account. ...
- Write Off Business Trips. ...
- Itemize Your Deductions. ...
- Claim Military Members Deductions. ...
- Donate Stock to Avoid Capital Gains Tax. ...
- Defer Your Taxes. ...
- Shift Your Income In Other Directions.
Tennessee does not have an individual income tax. Tennessee has a flat 6.50 percent corporate income tax rate and levies a gross receipts tax. Tennessee has a 7.00 percent state sales tax rate, a max local sales tax rate of 2.75 percent, and an average combined state and local sales tax rate of 9.55 percent.
Vermont ranks as the most generous state with the average low-income person receiving about $26,000 in benefits.
Key findings: Colorado ranked the top state in the nation for housing assistance from 2018 to 2019. Connecticut saw a 23.6% decline in homelessness from 2018 to 2019.
Where is the best place to live without taxes?
Some of the most popular countries that offer the financial benefit of having no income tax are Bermuda, Monaco, the Bahamas, and the United Arab Emirates (UAE).
Senior Exemption Information
The property must qualify for a homestead exemption. At least one homeowner must be 65 years old as of January 1.
As of 2023, nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — do not levy a state income tax.
The 183-day rule requires that a person looking to declare residency in Florida for state tax purposes must reside in Florida or another non-taxing state for at least 183 days (in other words, one day more than six months). Any time spent in a state can count as a day.
Key Takeaways. U.S. citizens who work abroad may not have to pay taxes to Internal Revenue Service if they meet specific criteria. Religious organizations are exempt from paying taxes. Some low-income taxpayers may be exempt from paying taxes.
