The states that have no income tax as of 2018 are Wyoming, Alaska, Texas, Washington, Florida, Nevada, and South Dakota. Two other states with an incredibly low rate, on the other hand, are New Hampshire and Tennessee.
Although the above-mentioned states do give it’s residents a tax break, they often have trade-offs in the form of high gas or grocery prices which sometimes would equate to states that do collect state income taxes. This means the people are still paying in other ways even if they no longer need to file a second tax form.
Here are the things you need to know before you plan of moving or buying a new house in these states as they may still levy additional taxes on you anyway.
Wyoming
Aside from not imposing a personal state income tax, Wyoming doesn’t impose corporate state income taxes as well. This is probably the best states among other states. It has an average effective property tax rate of only 0.52% as of 2018 and does not collect taxes from retirement income. It’s average sales tax rates also sits at 5.49%. The catch, however, is that Wyoming is big on property taxes and taxes on business involved with natural resources production such as coal and others.
As for personal income, you might consider living in Wyoming when you retire because it does not have personal income and retirement taxes.
Alaska
The State of Alaska eliminated state income tax since 1980 and no longer have sales tax as an added bonus. The residents of the state also receive additional cash from the Alaska Permanent Fund Corp every year.
Alaska does still need to find a way to make money so what they do is that they levy other taxes such as high estate, severance, excise, and gift taxes. In addition to this, the legislators in the Last Frontier have brought up the idea of bringing back state income tax since one of Alaska’s main source of revenue comes from its huge production of oil and gas and the price of oil haven’t been very high lately. Alaskan residents however currently don’t have to worry about a state-wide tax although there are other municipalities that are allowed to enforce local sales taxes.
Texas
The old Texas Constitution is the reason why personal state income taxes is forbidden in the state. The hefty sales and use taxes however which is around 8.25$ in some areas as of 2018 have to be done instead of hiking up revenue through income taxes. Furthermore, the residents still get a formidable sum taken out other ways despite the personal income tax break as Texas has the fourth-highest property taxes in the United States. As a matter of fact, the additional sales taxes in different jurisdictions largely pay the government bills.
Washington
The fifth-hefty sales taxes in the country is collected from the state of Washington despite the lack of state income taxes. However, even for the wealthiest top percent, residents voted to keep state income tax out. There’s quite a trade-off on this state because it’s sales tax rates come in at around 6.5% with additional local sales taxes bringing the average up to about 9%.
Florida
Florida wields heavy sales taxes over its residents to the tune of around 6% even though the Sunshine State does not have to deal with state income taxes since 1855. Florida is also one of the highest property tax rates around but still remains an very popular spot for retired individuals.
Nevada
The earnings of Nevada which are around a billion dollars a year come from the sales tax from tourism and gambling. It, therefore, made the state income tax-free as well as the source of government's funds. The hefty sales tax of around 6.85%, however, is something you need to consider if you want to live in this state.
South Dakota
The Department of Revenue Special Tax Division in South Dakota makes up for the absence of state income tax by imposing excise taxes on things like cigarettes, alcohol beverages, banks, and even a fee on coin laundromats. South Dakota remains to be an attractive state for retired individuals even though there have been several attempts to reinstate the state income tax that was back in 1943.
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