Tax day is right around the corner. For many Americans, tax season is a dreaded time. But what if you could ditch the tax forms altogether? Believe it or not, there are actually several states that don’t levy a state income tax! This can be a major perk, especially for high earners. Is moving to one of these states really the key to financial freedom? Let’s dive in and explore these unique states.
States with no income tax
As of 2023, there are nine states:
- Alaska
- Florida (our favorite)
- Nevada
- New Hampshire (though it taxes interest and dividends)
- South Dakota
- Tennessee
- Texas
- Washington (with a capital gains tax for high earners)
- Wyoming
These states generate revenue through other means, such as sales taxes, property taxes, and severance taxes (on resources like oil). With this said, the lack of such a tax has certainly been a major factor in more Americans opting to relocate to The Sunshine State.
Things to consider beyond state income tax
While the lack of income tax is certainly appealing, it’s not the only factor to consider when choosing a place to live. Here are some additional things to keep in mind:
- Cost of Living: Some of these states may have a higher cost of living, negating the tax savings. Research the overall cost of living in your desired location.
- Other Taxes: These states may have higher sales taxes or property taxes to compensate for the lack of income tax.
- State Services: These states may have fewer resources for public services like education and infrastructure.
Summary
Ultimately, the decision of whether to move to a no-income-tax state depends on your individual circumstances. If you’re a high earner, you might see significant tax savings. Furthermore, you can also have more control over your exposure to the state sales tax based on your purchasing habits. Of course, the lack of a state-imposed tax on earnings is only one of the many reasons to consider living in Florida. To view our previous article on reasons to move to Florida, click here.
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