15 States That Tax Your Income the Least | The Motley Fool (2024)

FAQs

Which state taxes your income the least? ›

Which Are the Tax-Free States? As of 2023, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.

New York has the highest overall tax burden, while Alaska has the lowest. Maine has the highest property tax burden, while Alabama has the lowest. California has the highest individual income tax burden, while seven states (including Texas, Florida and Washington) have the lowest.

As of 2023, nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — do not levy a state income tax.

A: The best state to retire in 2024 is sunny Florida, according to WalletHub, thanks to its relative affordability and high quality of life for seniors. That's followed by Colorado, Virginia, and Delaware.

States without income taxes may save you a lot of money when it's time to file taxes, but there may be hidden costs of living in such states, like higher sales and property taxes. Before moving, it's important to consider the full picture to better understand the potential impact on your finances.

Sticky states for tax purposes include California, New Mexico, New York, South Carolina, and Virginia. These states all define residency in a way that makes it more difficult to prove you no longer maintain ties there.

What is the best state to live in tax wise? ›

In 2020, the average American contributed 8.9% percent of their income in state taxes. Alaska had the lowest average overall tax burden – measured as total individual taxes paid divided by total personal income – at 5.4%, followed by Tennessee (6.3%), New Hampshire (6.4%), Wyoming (6.6%) and Florida (6.7%).

While Florida does not tax personal income, it's important to note that the state does place a levy on corporate profits. So if you own a company doing business in Florida, you may owe money to the state government. Local governments in Florida also depend on property taxes for revenue.

Instead of collecting income taxes, Texas relies on high sales and use taxes. When paired with local taxes, total sales taxes in some jurisdictions are as high as 8.25%. Property tax rates in Texas are also high.

Tennessee levies tax on other items, outside of income. This is how they collect money to pay for municipal items such as first responder services, infrastructure, roads, schools, and more.

States without income taxes may save you a lot of money when it's time to file taxes, but there may be hidden costs of living in such states, like higher sales and property taxes. Before moving, it's important to consider the full picture to better understand the potential impact on your finances.

With no state income tax — the state constitution forbids it — Florida's state government generates the bulk of general revenue (75% to 80% depending on the year) from sales tax collections. It gets the rest from a variety of sources, including documentary stamp taxes, insurance taxes and corporate income taxes.

How Florida Has No Income Tax. In 1968, the Florida Constitution was ratified to prevent the state from collecting an income tax. And the state constitution protects taxpayers from having the state impose new taxes or raise them.