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    Article

    States with no income tax

    Jan 22, 2020

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    No one likes paying taxes. Could it be cheaper to live in a state with no income tax?

    Taxes, taxes, taxes. No one likes paying taxes. After paying federal personal income taxes, the state you live in wants its share too.

    While states in the United States receive federal assistance for some programs, each state is still responsible for raising its revenues to pay for education, transportation, health care, and other programs. The money is typically raised through taxes. If states don't levy tax on income, then other sources of taxes are needed. Taxes such as sales tax (extra money you pay when buying certain consumer goods) and property taxes (money you pay when you own real estate). Additional taxes are fees on licenses, inheritance, and excise taxes on gasoline. State tax rates vary greatly by state.

    Currently in 2019, seven states do not have a state personal income tax that taxes earned and unearned income. These states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Tennessee and New Hampshire currently tax investment income and interest but not earned income such as wages.

    Keep in mind that just because you live in a state with no personal income tax doesn't necessarily mean you won't need to file a state income tax return. You may need to file a part-year resident return if you moved during the year from one state to another. A non-resident return may need to be filed for a different state if you have source income from that state such as rental income from a vacation home in another state.

    While it may be appealing to live in a state that does not tax personal income, other types of tax may be imposed on residents. Be sure to check state law for all types of tax when considering a move.

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