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Which States Have No Income Tax?

Florida has neither an income tax nor a property tax.
Alaska does not have an individual state income tax.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 11 August 2014
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In the US, there are several states that have no income tax. It is important to bear in mind, however, that income tax is only one way a state gathers money to pay for its expenses. The following states are income tax free states: Wyoming, Washington, Texas, South Dakota, Nevada, Florida and Alaska. New Hampshire and Tennessee only charge income tax on income that is derived from interest or stock dividends.

This doesn't mean that people should immediately move to one of these states to pay no income tax. Usually state income tax is fairly low, and states use other means to fill their coffers. These can include sales tax, taxes on property, luxury taxes, taxes on corporate profits, and taxes on state activities. For instance, Nevada gets much of its revenue from taxes assessed on gambling activity. Only one state, Alaska, charges no income tax and no sales tax either.

How much a person will pay in taxes depends on their assets, and in most states there are some breaks in property tax charges for people of low income or for people over a certain age. When this is compared with cost of living in certain states, whether a state charges no income tax, a "no tax" state may not be the most affordable state, especially for certain age groups or income ranges.

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Some states with no income tax may be particularly challenging ones to live in. Alaska, though it has the double benefit of no income tax and no sales tax, has many rural areas and harsh winters that can make it unattractive as a state of choice to live in. Of course, there are many people who adore their state of Alaska and wouldn't live elsewhere. The cost of living may be high, however, and certain necessities can be far out of reach in remote areas, making it not an ideal state, especially for people of little means or with limited mobility.

Florida, on the other hand, with its dual benefit of no income tax and no tax on property, often makes an ideal retirement spot for some people, and explains the higher number of retirees that choose to make their homes there. Though Florida can boast beautiful weather much of the year, there are occasional hurricanes and storms that can be severe, and anyone living there, especially with reduced mobility or straightened means, should have a good support system in place to help them during emergencies.

Before anyone makes a move, they should also consider the effects of local taxes. Some counties, cities, and municipalities are able to charge higher sales taxes or add on to property taxes. These can make a difference in overall cost of living and might determine which states and areas in states are least expensive. Price of relocation could also nullify effects of paying no income taxes for years to come.

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Discuss this Article

anon121067
Post 8

NH has no income or sales tax. I live here, they tax dividends 5 percent and they have a meal tax of 8 percent, but you can avoid the meal tax by not eating out.

While you can argue that taxing dividends is an income tax or taxing meals is a sales tax, it's also true that in Alaska the local cities and towns can have there own sales tax, this is not allowed in NH. NH has the second lowest tax burden per citizen next to Alaska. They have a business tax and have a state wide property tax on education. The local cities and towns are forced to pay for most of there funding through property taxes. Although the property tax is higher then most states it prevents waste which is why the tax burden overall is the second lowest in the nation.

If you take Massachusetts, for instance, the state legislators can keep giving more funding to Boston because the rest of the state pays for it, the tax goes up slightly and they get away with it, overtime it adds up but short term they sneak it in. In NH since the town has the pay for it they would have to raise property taxes for the town, you can only raise the properly tax so much before the people start to bark, as a results it forces the cities and towns to have a better handle on their budget.

nolo
Post 7

anon77702,

Those are local property taxes, not state taxes. It benefits the community you are in and ONLY that community - the State government doesn't get a dime of it.

anon77737
Post 4

I live in the US Virgin Islands. Tourists always have questions because we pay no income tax here. It would be of interest to your readers to discuss the tax status of the US Territories.

anon77702
Post 3

You said Texas does not have property taxes. We do. Each of the 254 counties has an appraisal district to establish the value to be taxed.

Moderator's reply: We've removed this line from the article because it might be misleading. Texas and Florida both have local property taxes.

ellefagan
Post 2

You are right to say " don't rush to live in a tax-free state - they find other ways to fill the coffers." It has been my experience that it all levels out, re: such charges, although, I must admit, having lived in a state with very low property tax but higher tax on luxury items, the happy thought, from time to time, about it, was fun.

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