US Tax-Free States List: One strategy to save taxes is to move to a place where income taxes are nonexistent. By 2027, there will be no income tax in nine states instead of the current seven. New Hampshire and Washington are gradually eliminating their taxes.
US Tax-Free States
Businesses and individuals must file yearly state income tax returns to determine their tax liabilities; however, some states do not impose taxes.
Governments raise funds for various initiatives, infrastructure, and essential services like social security. Relocating to a state with no income tax is one method to lower your total tax burden.
List of Tax-Free States in the US
There are now nine US states without a state income tax. These states include:
Alaska
Alaska, the largest state in the union and one of the tax-friendliest eliminated its income tax in 1980. Alaska has a 5.06% personal income tax, the lowest overall tax rate among the 50 states.
Residents receive annual payments from the Alaska Enduring Fund Corp., which includes a dividend payment of $1,312.
Florida
Florida has a low total tax burden of only 6.33% while having a high sales and eradication tax rate. Because of its many retirees and pleasant temps, the state is a favorite among snowbirds.
In 2020, despite rising housing costs, it was the thirty-first most affordable state. Florida is rated a C for its infrastructure and fair distribution of public financing to schools. From $8,076 to $9,865, the average yearly cost of healthcare has increased.
Nevada
At 7.69% of personal income, Nevada has the second-highest overall tax burden in the US. Excise taxes and revenues provide for the majority of Nevada’s income. Nevada has state, county, and regional sales taxes that are comparatively high.
It is ranked 19 out of 50 on U.S. News & World Report’s list of the “Top States to Live In,” however despite that ranking, it has expensive housing and living costs. It comes in at number 38. Nevada spent $10,450 on education in 2021—some of the lowest amounts in the country.
New Hampshire
New Hampshire has the third highest total tax burden in the nation, at 6.14%. Earned income is exempt from state taxes, while dividends and interest are. There is no state sales tax in the state; instead, it collects excise taxes, which include alcohol taxes.
U.S. News & World Report places New Hampshire at number six. New Hampshire will keep taxing investment profits and interest through 2027. New Hampshire endures some of the highest property taxes and cost of living in America.
South Dakota
South Dakota collects revenue through a range of levies, including taxes on cigarettes and alcohol, as it does not have an income tax. Because of the high sales tax rates in the state and the existence of the credit card sector, residents are not subject to income tax.
South Dakotans, who rank eighth in the nation for total tax expenditure, only pay 6.69% of their income in taxes. According to U.S. News & World Report, the state ranks eighth for affordability and 12th overall for “Best States.”
Tennessee
Tennessee’s 6.22% overall tax burden ranks it fourth in the nation due to a yearly 1% drop in individual income taxes. The state ranks 14th in terms of affordability. It does not rank highly in terms of spending on healthcare and education, with 276 dams that have a high potential for risks and 4.4% of bridges having structural faults.
Tennessee started to phase away its tax on investment interest and dividends in 2021. This state generally has a sales tax that is higher than normal.
Texas
Texas boasts some of the lowest state and local tax rates in the nation. Despite not having personal income taxes, Texas depends on both revenue and earnings taxes to pay for its services and infrastructure.
With sales taxes as high as 8.25% in some areas, the total tax burden is equal to 8.19% of personal income. Despite this, Texas is ranked 22nd in the US for affordability and 35th on the list of Best States to Live in.
Washington
Washington is one of the most expensive states while having comparatively average revenue and municipal taxes. Washington has an overall tax burden of 8.24% despite having a young population and many significant enterprises. This is because of the state’s high sales and excise taxes, as well as rising gas prices.
Despite being the second-best state to live in according to U.S. News & World Report, the state only receives a 26 out of 50 on the affordability scale.
The Wyoming
The state and Tennessee are tied for the second-highest burden of local and federal sales taxes. The state with the smallest population in the union has a higher-than-average cost of living.
Wyoming, with six people per square mile, has the second-least dense population. Due to low revenue tax rates, the absence of corporate income taxes, personal income taxes, and pension income taxes, the overall tax burden is 6.42%.
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