For people considering a move to a new location, especially those nearing or at retirement age, the level of taxation can become a deciding factor. That’s why people often consider moving to a state with no income tax.
Currently, seven states impose no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two more do not tax income – New Hampshire and Tennessee. However, both of those states do impose an income tax on dividends and income from investments.
If you’ve got money on your mind as you consider a move, here’s a look at the pros and cons of states without an income tax.
Why You Should Move to a State With No Income Tax
In addition to warmer weather and a growing number of jobs in different industries, there’s a reason why people continue to move to Florida and Texas in huge numbers: the lack of state income tax. It’s an especially important benefit for high-income earners and retirees living off investment income. But it benefits everyone by putting more cash into their pockets to afford other expenses such as vacations, college tuition, a new automobile, etc.
No Income Tax States
Most of the no income tax states also couple no income tax with other benefits, which include the following:
- Alaska. The state’s Permanent Fund Dividend Program distributes money each year from the state’s mineral revenues to permanent residents. In 2020, each resident received $992.
- Florida. The Sunshine State offers world-class beaches and amusement parks, along with sunshine throughout the year. Additionally, homeowners in Florida can make up to $50,000 of their home’s value exempt from taxes through the state’s Homestead Exemption.
- Nevada. In addition to no state income taxes, the state also offers the most famous city for casinos and gambling in the world in Las Vegas.
- South Dakota. This state offers one of the lowest costs of living in the U.S.
- Texas. Texas has two of the fastest-growing metropolitan areas in the country in Dallas and Houston, both of which offer very affordable housing.
- Washington. Washington is a major draw for its tech companies that include Microsoft, Google, and Amazon.
- Wyoming. This western state offers breathtaking mountains, low population density, and low crime. It’s also known for cheaper housing prices.
Things To Consider With Low Tax States
If you have a state with no income tax on your list of potential relocation spots, it’s important to look at all other taxes. For example, Texas and New Hampshire are known to have higher property tax rates to help make up for the lack of income tax. Make sure the money you intend to save through lower sales taxes is not spent on paying for other taxes.
Most people, however, find it worthwhile. For example, Florida remains one of the most popular states to move to in the country, according to USA Today. Among the hottest spots are Cape Coral and the Tampa Bay region that includes Tampa, St. Petersburg and Clearwater.
If you are looking to move to a no income tax state, you are certainly not alone. The first steps are to research the area and find out if it has the amenities you want, and make sure to partner with a professional moving company that offers all the services you need.