| Nine States with No Income Tax |
| By Morgan Quinn |
| RISMEDIA, Tuesday, February 24, 2015— (TNS)—There are only seven states in the U.S. that impose no income tax on their residents, and two more that don’t tax personal income, but do tax capital gains, interest or dividends. Residents of these nine states save hundreds to thousands of dollars each year enjoying zero state income tax liability, when compared to residents of states that do levy income taxes.
But that doesn’t mean you should pack up and move to one of these states tomorrow so you can start pocketing all that tax-free income. States have to have money to run and that money has to come from somewhere — usually from sales tax, property taxes, business taxes or other fees that can quickly add up. Still, there can be many financial incentives to move to a state without income tax. You just have to do the math and make sure the benefits are really worth it. Here are the nine states with little-to-no income tax. ALASKA Alaska doesn’t impose any state income tax, but its residents have to put up with harsh winters, isolation from the rest of the country and odd daylight hours. It might seem like a tough place to live, but Alaska makes up for it with additional tax benefits: Senior citizens are exempt from paying property tax on the first $150,000 of assessed value of a property, and the average state and local taxes per capita are the 18th-lowest out of all 50 states, according to the Tax Foundation. The state’s higher median income of $61,137 isn’t bad, either. FLORIDA Florida attracts residents with its warm weather, beautiful beaches and lack of state income tax. But the Sunshine State does impose a sales tax of 6 percent, as well as high property taxes. The median household income in Florida is just $47,866. Despite this, per capita state and local tax burden in Florida was fairly average and the Tax Foundation ranked it 24th-highest out of all 50 states. NEVADA It may come as no surprise that the home to the United States’ gambling capital doesn’t impose income tax on its residents. Instead, Nevada funds itself through sales and use taxes, which start at 6.85 percent and bring in 72 percent of the state’s revenue which is largely paid by tourists and visitors, reports USA Today. The Tax Foundation also ranked Nevada’s per capita state and local tax burden at the 15th-lowest. Even so, the state’s annual median income is on the low end at $45,369. NEW HAMPSHIRE New Hampshire has no income tax but does impose a capital gains tax. On its capital gains tax, New Hampshire allows no standard or dependent deductions, but personal exemptions are $2,400 for single filers and $4,800 for joint filers. To make up for the lack of revenue from income tax, the state has a steep 8.5 percent corporate tax rate and a high property tax rate, according to USA Today. SOUTH DAKOTA South Dakota is the only Midwestern state that does not impose state income tax on its residents, and ranked seventh-lowest by per capita sales and local tax burden, according to the Tax Foundation. This means South Dakota residents keep much more of their relatively-higher incomes (the state median is $54,453). The state relies more heavily on tourism for revenue through its 4 percent sales and various use taxes than any other state in that region. TENNESSEE Like New Hampshire, residents of Tennessee do not pay income tax, but single and joint filers do pay a “hall tax” of 6 percent on interest and dividends. The state does not offer dependent exemptions or standard deductions on interest or dividend income, but does provide personal exemptions on those earnings. Single filers with capital gains income are exempt $1,250 and married couples filing jointly are exempt $2,500. Tennessee sales tax is a higher 7 percent and the state has the lowest median income, $42,499, of the nine listed here. But the state still boasts the second-lowest per capita state tax burden of any state, according to the Tax Foundation. Additionally, Tennessee voters just passed an amendment to the state’s constitution that prohibits the state from levying a payroll or personal income tax in the future. TEXAS The big state of Texas has no income tax, but the state has to get money from somewhere. Texas has a high sales tax of 6.25 percent, taxes on motor vehicles sales and fuel, and taxes and royalties on oil and natural gas production. Texas residents also enjoy a decent median household income of $53,027. WASHINGTON Washington also doesn’t charge income tax to its residents. The state does impose higher sales tax than some other states in the region, with some areas charging as much as 9.5 percent. Washington state businesses must also pay a gross receipts tax, which amounts to about 1 percent of revenue—even if the business is losing money. Washington residents have the highest tax bill of any levied by the nine states with no income tax, ranking as the 12th-highest per capita state and local tax burden. WYOMING Wyoming residents don’t pay state income tax, which helps the cushy Wyoming median household of $55,700 go further. The state also has fairly low sales tax of 4 percent. Wyoming generates revenue through natural resources taxes and property taxes, which are at 9.5 percent. © 2015 GOBankingRates.com, a ConsumerTrack web property. |