If you are considering the best place to retire, or planning a permanent move at any age, living in states with no income tax most certainly can be good for your checking account.
Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don’t have a state income tax. And some experts include New Hampshire and Tennessee, which don’t tax earned wages.
Alas, there is always a disclaimer: Residents who live in states without an income tax often must pony up on the back end with state sales taxes that pay for roads, schools and other necessities.
Residents of New Hampshire and Texas, for instance, pay some of the highest property taxes in the country.
Besides savings, there’s also another consideration taking place now in a migration shift. An analysis of 2020 moving data by United Van Lines cited the COVID-19 pandemic as a driver for people moving from states with high taxes, such as New York and California, to no-income-tax states, such as Tennessee and Florida.
So, whether you prefer the chilly vibe of Alaska, or the sand- in-your-shoes feel of Florida, here are circumstances to consider involving all nine states before you decide to pack up and go:
Big bonus: There is no state sales tax (one of five states in the country). There is also no inheritance or sales tax. The downside? The money you save may be spent on winter clothing and heating bills. Winter temperatures in Alaska range from 20 degrees to minus-10 degrees in the winter.
Floridians pay a 6% sales tax, with another 1.08% tacked on locally, a combined average of 7.08%m according to the Tax Foundation. Still, the Sunshine State remains one of the best states for retirement, according to multiple sources, including Bankrate.com. It’s a reason why 21% of the state’s population is 65 or older.
3. New Hampshire
The good news: New Hampshire has no state or local sales tax. The bad news: The state’s median property tax rate is $2,050 per $100,000 of assessed home value, making it the third-highest rate in the country. More positive news: New Hampshire is considered an affordable place to live, with more than 71% of the population owning their homes.
On the plus side, Nevada’s median property tax rate is $533 per $100,000 of assessed home value. That makes it one of the lowest rates in the country. On the downside: a state sales tax of 6.85%, with localities having the option of adding as much as 1.53%. The average combined rate is 8.23%, which is on the high end, according to the Tax Foundation. And if you are up to winning big — or possibly losing big — there’s always Vegas, Baby.
5. South Dakota
Overall assessment is good. It is considered a tax-friendly state with a 4.5% state sales tax, although localities can add as much as 4.5%. The average combined rate is 6.4%, below the average combined rate, according to the Tax Foundation. South Dakota is known to have one of the best qualities of life in the country, with plenty of space to spread out — fewer than a million people live in South Dakota.
It has a 7% state tax, but there’s also an additional tax of 2.75% on sales that are applied to the portion of the sales price of single items from $1,600 to $3,200. Localities can add up to 2.75%. That bumps it up to a combined rate of 9.547% – the highest combined rate in the nation, according to the Tax Foundation. Big Plus: Nashville — The Grand Ole Opry, Music City!
Expect a big bump in your median property tax rate. It’s $1,692 per $100,000 of assessed home value in Texas, tied for seventh-highest rate in the country. On the flip side, Texas is the second-largest state in the nation behind Alaska. If you want to go “big city” then Dallas is the place for you. If you prefer to downsize city-wise, try New Braunfels, a small river town that is home to the Guadalupe River.
It has a tax of 49.4 cents per gallon on gasoline, which is one of the highest rates in the nation. Washington also has a 6.5% state sales tax, although municipalities can tack on an additional 4%. At an average of 9.29%, Washington has the fourth-highest combined rate in the country, according to the Tax Foundation.
If nature calls, there is a lot to love here with wide open spaces and Yellowstone National Park. On the fiscal side, things look pretty good, too. Sales tax is 4%, with municipalities having the option of adding up to 2% on top of that. The combined rate of 5.39% is eighth lowest in the United States, according to the Tax Foundation.
Botton Line: If you can afford it, and it makes you happy, pack your bags and stay a while.