A way that many people save money in taxes is to live in a state with no income tax. This can lower your risk of being audited, and it will help you to save more of the money that you make. There are currently eight states which do not have any income tax on their citizens. These states are Alaska, Florida, Nevada, South Dakota, Texas, Washington State, New Hampshire, and Wyoming.
An income tax is a tax charged to individuals or businesses on their income. These taxes are levied both by the federal government and by state governments. Over the past decade, there has been a movement to lower income taxes in many states. This can save you on your tax bills every year.
Outlined below are further details about each state in regards to why they do not have an individual income tax on residents or what yearly benefits come along with living in these areas:
Alaska
Alaska does not collect state individual income taxes. Instead, Alaska depends on oil and gas for most of its state revenue. This makes it a strong benefit for anyone considering moving to Alaska because they can save a significant amount of money each year. The average personal income taxpayer contributes $1,931 in taxes per year. The state sales tax is 4%.
Florida
Florida does not have a state individual income tax, but they do collect an extensive amount of other types of taxes such as excise taxes, real estate tax, and corporate income tax to make up for it. In recent years the tax burden has been decreasing due to economic growth in the area which is another benefit of living here. The average personal income taxpayer contributes $5,482 in taxes per year. There is no sales tax.
Nevada
Nevada does not have any state individual income tax either and instead gets its revenue from sales and use taxes along with employment and gaming taxes. The lack of state individual income tax makes this a unique and attractive state to live in as it is always good to save money. The average personal income taxpayer contributes $6,305 in taxes per year. Sales tax ranges from 6.85% to 8.1% depending on the city.
South Dakota
This state does not collect an individual income tax or corporate income tax, instead gets its revenue from excise taxes, bank franchise taxes, and sales and use taxes. This makes for one of the most beneficial states to live in as they don’t take any additional money from you after you’re paid. The average personal income taxpayer contributes $2,247 in taxes per year. Sales tax is 4%.
Texas
Texas has no income tax with high property and business incomes which make up for it instead. Additionally, Texas doesn’t have an estate or inheritance tax so if you consider your assets’ long-term the cost savings over your lifetime will be significant. The average personal income taxpayer contributes $4,638 in taxes per year. Sales tax is 6%.
Washington State
This state also does not have an individual income tax so it is another solid choice for money savings after you get paid. The state has high sales and use taxes which do collect some revenue, but overall it is beneficial if you are considering moving to Washington State. The average personal income taxpayer contributes $4,892 in taxes per year. Sales tax is 6.5%.
New Hampshire
New Hampshire also does not have an individual income tax making it another great place to save up after working. The only real expense that they have is the business profits tax, but that can be written off on your federal level so it doesn’t affect each taxpayer personally. The average personal income taxpayer contributes $3,715 in taxes per year. Sales tax is 0%.
Wyoming
Wyoming also does not have any state individual income tax on their citizens either, instead of having somewhat standard sales and use taxes along with low property taxes which make for a fair system in terms of taxation. The average personal income taxpayer contributes $3,934 in taxes per year. Sales and use tax is 4.5%.
States without income taxes offer excellent opportunities for people who are looking for a way to save money and lower their risk of being audited by the IRS. These places create a low-risk environment where it is beneficial from both a tax deduction standpoint as well as from a cost-savings perspective long term. If you are considering moving to a new state or thinking about where to retire, take a look at these states to determine which one will offer the highest quality of life for you.
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