No income taxes? What to know about states where rates are 0%
Former UBS CFO Bob Stefanowski discusses the slew of new taxes hitting Connecticut, including taxes on digital purchases, prepared meals, short-term rentals, some alcohol and e-cigarettes.
A handful of states that do not tax income have gotten an increasing amount of interest – and new residents – after the new tax law capped state and local tax (SALT) deductions at $10,000.
Residents from high-tax states have opted to lower their tax burdens by moving to states like Florida, Texas and Nevada.
There are currently 9 states that have no income taxes. Two of them, however, do tax investment income and interest – New Hampshire and Tennessee.
It’s also important to note that in some cases, states that don’t tax residents’ income do have higher rates for other types of taxes – like sales or property taxes – to make up for a loss in revenue.
Here’s an overview of the states where individuals’ income is not subject to taxation.
Alaska
Alaska has no state income tax.
Alaska also currently does not have a sales and use tax – though some local jurisdictions impose their own.
According to a study by WalletHub, Alaska has the lowest tax burden of any of the 50 states – at a cumulative 5.1 percent. The average property tax burden is 3.66 percent.
The median price of a home currently listed on the market in Alaska is $289,550, according to online real estate site Zillow.
Florida
Florida is a popular low-tax destination for people fleeing high-tax states. In fact, it received more movers than any other state last year, according to data from the U.S. Census Bureau.
The effective real estate property tax rate in Florida is 0.98 percent, according to data from WalletHub.
Florida’s general state sales tax rate is 6 percent – though localities can collect their own sales taxes, too, for a maximum rate of 8.5 percent.
The median price of homes sold in Florida is $226,700, according to Zillow.
Individuals earning $650,000 can save more than $69,700 in taxes per year by moving from New York to the Sunshine State.
Nevada
What Nevada lacks in income taxes, it may make up for elsewhere.
The state sales tax rate in Nevada is 4.6 percent – thought it can reach as high as 8.265 percent in certain localities. The total sales and excise tax burden is the second-highest of any state besides Hawaii.
Property taxes are relatively low, at about 2.24 percent, according to WalletHub.
According to Zillow, the median price of a home that is sold in the state is $324,900.
Despite the fact that it is one of a few states that has no income tax, it still ranked 29 in terms of overall tax burden.
South Dakota
The sales tax rate in South Dakota is 4.5 percent, but can reach as high as 6.5 percent depending on the rates in different localities.
The median price of homes listed on the market in the state is $225,000.
The average property tax burden is 2.87 percent.
Texas
In addition to Florida, Texas is another popular destination for those looking to flee high-tax states in the wake of the $10,000 cap on state and local tax (SALT) deductions.
The state imposes a 6.25 percent state sales tax, but local jurisdictions can also impose up to 2 percent sales and use tax for a combined top rate of 8.25 percent.
Texas has no state property tax – those revenue collections are up to local taxing units. According to WalletHub, the average property tax burden is 3.82 percent.
The median price of homes currently listed on the market is $279,000.
Washington
It may have no income tax, but Washington makes up for that loss of revenue in other areas.
For example, the state sales tax is 6.5 percent, but rates in certain localities can exceed 10 percent.
The median price of homes sold on the market in Washington is $369,900.
The average property tax burden in the state is nearly 2.6 percent.
Wyoming
Wyoming ranks 41 when it comes to its overall tax burden.
Sales tax rates in Wyoming are also pretty low, ranging between 4 percent and 6 percent.
On the other hand, it has a fairly high average property tax burden of 4.32 percent.
The median price of homes listed on the market in Wyoming is $260,000.
New Hampshire and Tennessee do not tax wages, but do currently tax investment income and interest. Both states have among the bottom five lowest tax burdens of all 50 states.