Are you planning on moving to another state? Then you might want to keep in mind what will change for you if you look at taxes. Taxes differ hugely from state to state, and eventually everyone wants a lower tax bill. One way to accomplish this is to live in a state with no income tax. Sound good, right? However, in some states you could end up paying more than you’d expect. In this article we therefore discuss the top 10 lowest tax states of the US.
Alaska has neither a state income tax nor a state sales tax. Alaskans pay the lowest overall state and local tax burden of any state, at 5.16 percent of personal income, which includes income, property, sales, and excise taxes. However, Alaska’s cost of living is expensive, due to the state’s remote location. Apart from that, Alaska has the highest and fastest-growing healthcare costs of any state in the United States.
The Grand Canyon State made the squad because of its low income taxes. Middle-income family taxpayers, don’t pay the lowest rate in the state (2.59 percent), but they don’t pay much more at 3.34 percent. However, the state’s sales tax is higher than the national average. It all starts with a state sales tax of 5.6 percent. Arizona’s corporate income tax rate, though, is one of the lowest in the country, just in case you want to start a business when you move.
Delaware is one of the most tax-friendly states for middle-class families, thanks to its low sales and property taxes. There are no sales taxes in Delaware, therefore they can’t go any lower than they are in The First State. As a result, you can shop until you drop in Delaware and not pay a single dime in sales tax. Delaware, on the other hand, isn’t particularly strong when it comes to state income taxes. Any personal income over $60,000 is subject to a maximum tax rate of 6.6 percent. Overall, you’d be looking at some significant savings in Delaware.
There is no income tax in Florida. This reduces the overall tax burden on middle-class families and everyone else in the state and local government. Other taxes in Florida, on the other hand, are average when compared to other states. The sales tax is a different situation. The state sales tax is 6% on its own.
You also don’t have to pay income tax in Nevada. But that isn’t the only benefit for citizens of the Silver State when it comes to taxes. Nevada also boasts the country’s fourth-lowest average property tax rates. However, Nevada’s sales taxes aren’t as cheap. The state sales tax rate is 6.85 percent, which is quite high. When municipal taxes are factored in, the average combined state and local sales tax rate rises to 8.23%, the 13th highest in the country.
Despite the fact that North Dakota has an income tax, the rates are very low, especially for middle-income workers. However, this is the highest marginal rate, which only applies to income over $433,000 per year. The majority of income in the state is taxed at 2.04% or 2.27 percent. North Dakota does have a sales tax, but it is only 5%, which puts it in the middle of the sales tax pack.
Personal and business income are not taxed in South Dakota. Furthermore, its sales tax—on average, around 4.5 percent in state taxes and 1.9 percent in local taxes—is on the lower end of the sales-tax scale. Especially for retirees, South Dakota is the most tax-friendly: Social Security, pensions and other forms of retirement income are all devoid of taxes.
Tennessee has one of the most ‘unique’ income tax systems. There used to be a tax on interest and dividend income in Tennessee, but it was repealed at the end of 2020. (the tax rate was 1 percent in its final year). On the other had, the state drops the ball a little when it comes to sales tax. This is the highest in the United States with an average of 9.5%.
Wyoming is also one of the states that doesn’t collect income tax. For most people, Wyoming is a tax haven: it keeps other tax rates super low as well. Aside from not collecting corporate or personal income taxes, the state’s sales tax rate is only 4%, making it the second-lowest in the country. Wyoming also makes it a point to avoid paying modest fees.