Mar 22, 2024

Financial planning

The nine no income tax states in America

american flag
american flag

Amidst the chaos of the pandemic, a trend emerged: an exodus of American workers from pricey urban hubs to more affordable corners of the country. Quality of life, more affordable housing, spaciousness all were factors that drove the move… and so were taxes.? Tax funneled families from high-tax states like California and New York to low-tax havens like Nevada, Texas and Florida.


Now, if you're eyeing those juicy tax savings, here's the scoop: there are nine states in the good ol' U.S. of A. where you can say bye to income taxes once and for all.


  • Alaska

  • Florida

  • New Hampshire

  • Nevada

  • South Dakota

  • Tennessee

  • Texas

  • Washington

  • Wyoming


The higher your earnings, the more you'll save by reducing income taxes.


And if you're not currently residing in one of these tax-free havens, don’t worry! You can always plan to retire to one down the road. No income tax also translates to tax-free Social Security benefits, IRA or 401(k) withdrawals, and pension payouts. Maybe that Florida retirement plan seems sunnier now…?


State taxes have to come from somewhere


Despite the tempting prospect of avoiding state income tax, especially for high earners, remember: there's no such thing as a free lunch. States sans income tax still need funding for essential services like roads, schools, and emergency personnel. And where does that money come from? You guessed it – sales, property, and estate taxes foot the bill.


Those other taxes can pack a punch. For instance, in states without income tax, property tax rates often rank among the nation's highest. Take a peek at the map below and see how Texas and New Hampshire's property tax rates stand out.


So, before you pack your bags for a income-tax-free haven, do your homework. Understand the full set of taxes in the state you’re considering to make an informed decision.


property taxes by state


Property taxes by state


Here's a closer look at the nine states with no state income taxes, listed alphabetically with some great state-specific resources by Kiplinger's. 


1) Alaska


Sales Tax: Alaska is among the five states that don't impose a state sales tax. However, localities within Alaska have the authority to impose sales taxes, which can climb up to 7.5%. In areas where there's no property tax, sales taxes tend to be higher. Despite this, the statewide average, as reported by the Tax Foundation, stands at just 1.76%.


Property Taxes: 1.18%, slightly above the national average of about 1.1%. 


Inheritance and Estate Taxes: None. 


For more information, see the Alaska State Tax Guide.


2) Florida


Sales Tax: The state imposes a 6% tax, with localities having the authority to add up to 2%. On average, the combined rate stands at 7.02%, as reported by the Tax Foundation. This combined rate falls in the middle range when compared to rates in other states.


  • Groceries: Exempt

  • Clothing: Taxable

  • Motor Vehicles: Taxable (additional county tax on first $5,000 of purchase price may apply)

  • Prescription Drugs: Exempt


Property Taxes: 1.06%, ranked #25 highest property tax state.


Inheritance and Estate Taxes: None.


For more information, see the Florida State Tax Guide.


3) Nevada


Sales Tax: The state imposes a 6.85% tax, with localities having the authority to add up to 1.53%. On average, the combined rate stands at 8.23%, as reported by the Tax Foundation. Therefore, it might be advisable to keep your consumption spending low. 


  • Groceries: Exempt

  • Clothing: Taxable

  • Motor Vehicles: Taxable

  • Prescription Drugs: Exempt


Property Taxes: 0.86%, ranked #30. Buying property in Nevada is relatively more affordable. 


Inheritance and Estate Taxes: None.


For more information, see the Nevada State Tax Guide.


4) New Hampshire


Sales Tax: New Hampshire doesn't tax earned income, but there's currently a 5% tax on dividends and interest exceeding $2,400 for individuals ($4,800 for joint filers). However, this tax on dividends and interest is gradually being phased out. It will be reduced to 3% in 2024, 2% in 2025, and 1% in 2026. Finally, the tax will be completely repealed on January 1, 2027.


Property Taxes: 2.15%, #3 rank. You may want to rent instead of buy. 


Inheritance and Estate Taxes: None.


For more information, see the New Hampshire State Tax Guide.


5) South Dakota


Sales Tax: The state imposes a 4.5% tax. Localities have the authority to add up to 4.5%, resulting in an average combined rate of 6.4%, according to the Tax Foundation. This combined rate falls below the average.


  • Groceries: Taxable

  • Clothing: Taxable

  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax

  • Prescription Drugs: Exempt


Property Taxes: 1.32%, #16 rank. 


Inheritance and Estate Taxes: None.


For more information, see the South Dakota State Tax Guide.


6) Tennessee


Sales Tax: The state imposes a 7% tax. Additionally, there's a state tax of 2.75% on single item sales ranging from $1,600 to $3,200. Localities can add up to 2.75%, resulting in an average combined state and local rate of 9.55%, according to the Tax Foundation. This is the second-highest combined rate in the nation. However, local taxes are capped: only the first $1,600 of any single item is taxable.


  • Groceries: Taxable (4% state rate; additional local taxes may apply)

  • Clothing: Taxable

  • Motor Vehicles: Taxable (7% basic rate, plus 2.75% state tax on sales price between $1,600 and $3,200; additional local taxes may also apply)

  • Prescription Drugs: Exempt


Property Taxes: 0.75%, #38. The median home price in Nashville is only about $452,000. 


Inheritance and Estate Taxes: None.


For more information, see the Tennessee State Tax Guide.


7) Texas


Sales Tax: The state imposes a 6.25% tax. Localities can add up to 2%, resulting in an average combined rate of 8.2%, according to the Tax Foundation.


  • Groceries: Exempt

  • Clothing: Taxable

  • Motor Vehicles: Taxable

  • Prescription Drugs: Exempt


Property Taxes: 1.9%, #6 rank. Property tax is among the highest in the nation. You may want to rent instead.


Inheritance and Estate Taxes: None.


For more information, see the Texas State Tax Guide.


8) Washington


State Income Taxes: None. However, the state has imposed a 7% tax on the sale or exchange of certain long-term capital assets if the annual profits exceed $250,000. 

Sales Tax: The state imposes a 6.5% tax, and municipalities can add up to 4.1% to that. This results in an average combined rate of 8.86%, according to the Tax Foundation. Washington's combined rate ranks as the sixth-highest in the nation.


  • Groceries: Exempt

  • Clothing: Taxable

  • Motor Vehicles: Taxable (6.5% ordinary rate, plus additional 0.3% tax)

  • Prescription Drugs: Exempt


Property Taxes: 1.09%, #23 rank. The median home price in Seattle is about $799,000, one of the highest in the nation. 


Inheritance and Estate Taxes: Washington imposes an estate tax on estates valued over $2.193 million, with tax rates ranging from 10% to 20%. The exemption threshold is adjusted annually for inflation. Additionally, the state provides a $2.5 million deduction for family-owned businesses valued at $6 million or less.


For more information, see the Washington State Tax Guide.


9) Wyoming


Sales Tax: A 4% state tax applies, with municipalities having the option to add up to 2%, resulting in a combined rate of 5.36%, as per the Tax Foundation. This combined rate ranks as the seventh-lowest in the United States.


  • Groceries: Exempt

  • Clothing: Taxable

  • Motor Vehicles: Taxable

  • Prescription Drugs: Exempt


Property Taxes: 0.61%, #44 rank. The median home price in Cheyenne is only $354,000 according to Zillow. However, the median home price in Jackson Hole, where a lot of rich folks relocate to for tax purposes is a whopping $2.6 million. 


Inheritance and Estate Taxes: None.


For more information, see the Wyoming State Tax Guide.


The best cities in the no income tax states


Ranking the cities in the nine no-income-tax states may be subjective, but let's give it a shot anyway with some logic. 


Below is a chart that depicts how much a household needs to earn to afford the typical home in their local market, based on data from Zillow. The price of a median home in each city is greatly influenced by the job opportunities and incomes available. Typically, cities with more job opportunities and higher median household incomes tend to have higher median home prices, and vice versa.



To identify our top contenders, we need to cross-reference the cities with the highest income requirements with the nine no-income-tax states. They are:


  1. Seattle, WA ($213,984)

  2. Miami, FL ($151,163)

  3. Austin, TX ($149,267)

  4. Nashville, TN ($128,535)

  5. Orlando, FL ($121,418)

  6. Dallas, TX ($121,398)

  7. Las Vegas, NV ($119,529)

  8. Tampa, FL ($116,329)

  9. Jacksonville, FL ($109,271)


We wrap up our exploration in Jacksonville because any other city in the nine no-income-tax states falls short of the United States median income of $106,536. We're on the hunt for cities bursting with income opportunities!


Seattle takes the crown as the ultimate city without state income taxes. Why? Well, it's got the big guns—Amazon, Microsoft, Starbucks, Deloitte, Providence Health, and a bunch more heavy hitters. The weather may be drearier than most (it drizzles for half the year).. 


Austin has been riding the pandemic wave like a pro surfer, pulling in folks from pricey cities like San Francisco and Los Angeles. Plus, it's got the golden touch, attracting titans like Tesla and Oracle to relocate their headquarters. Meanwhile, Miami has been attracting tech talent and venture capitalists to its warmer climate. 


So, if you're eyeing a move for the cash and career boost, Seattle, Miami, and Austin are your best bets without those pesky state income taxes. And if Austin's on your radar, enjoy cheaper rents and house prices thanks to a wave of new supply shaking up the market.


Don't let taxes wag the income dog


Sure, skipping out on state income taxes sounds like a dream, but these nine states have their own tricks up their sleeves. And hey, if you stumble upon a killer job opportunity in a high-tax state, don't let the taxman scare you off. Oftentimes, the career experience may well be worth the extra tax bite.


And don’t forget,you can always consider moving to a tax haven in future chapters of life. If you've got stock options or investment deals,it could be worth it to time a relocation. 


That all said, there’s a balance to the role of taxes in your life.. Time is the one thing we don’t get more of: community and the quality of life are two of the important drivers of happiness. And if a tax decision aligns with that, maybe it’s the final puzzle piece to decide on a move. 


Here at Plenty, we can help you achieve your money resolutions today. Plenty is an an investment platform designed specifically for couples to build wealth, together. Plenty goes beyond budgeting, making it simple to invest, save and grow towards your future goals by unlocking access to the financial strategies of the wealthy. Ready to get started? Sign up for your free trial today.


__

This information is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any investment or other financial decisions. We do not endorse any third parties referenced within the article. Portions of the information and opinions contained in this material are obtained from third parties and other sources believed to be reliable,however the accuracy and completeness of the information cannot be guaranteed. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.



More

Financial planning

Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.


Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.


Plenty was founded to democratize access to financial products and tools that accelerate wealth building. Plenty Financial and affiliated entities. (“Plenty Financial”) provide a web, mobile, personal financial management and educational platform to consumers; some of these tools are freely accessible to all consumers, others require a fee-based subscription. Advisory services are provided in the form of software-first financial planning and investment advisory services for fee-based Subscribers. Plenty Financial RIA, LLC is an SEC-Registered Investment Advisor. All investments made are legally owned by you. Investing is inherently risky and Plenty does not guarantee positive performance. Investments are held in accounts at BNY Mellon | Pershings, the world's largest securities servicing company and are SIPC insured. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time.


Brokerage services are provided by Atomic Brokerage LLC "Atomic Brokerage", member FINRA and SIPC. Clearing and custody services are provided by Brokerage firm BNY Mellon Pershing, member SIPC. Plenty Financial RIA, LLC has a relationship with Atomic Brokerage to manage and execute investments on behalf of customers. Subadvisory services are offered through Atomic Invest LLC ("Atomic Invest"), an SEC-registered investment advisor, member SIPC. Atomic Invest was formerly known as Helium Advisors LLC.


Return data used in the interactive tool are hypothetical performance data which contains inherent limitations and is not a substitute for actual investment returns derived from a live portfolio. There are numerous risk factors related to trading and markets which cannot be fully accounted for when depicting Hypothetical Performance. Consequently, future returns are not guaranteed, and a loss of principal may occur. THIS IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. This site/application has been prepared by Plenty and is not intended to be (and may not be relied on in any manner as) legal, tax, investment, accounting or other advice or as an offer to sell or a solicitation of an offer to buy any securities of any investment product or any investment advisory service. The information contained in this site/application is superseded by, and is qualified in its entirety by, such offering materials. This site/application may contain proprietary, trade-secret, confidential and commercially sensitive information.


By accessing this site, you signify your agreement with and understanding of the following Terms of Use and Legal Information pertaining to both this site and any material in it. Plenty owns and maintains this site. No act of downloading or otherwise copying from this site will transfer title to any software or material at this site to you. Anything that you transmit to this site becomes the property of Plenty, may be used by Plenty for any lawful purpose, and is further subject to disclosure as deemed appropriate by Plenty, including to any legal or regulatory authority to which Plenty is subject. Plenty reserves all rights with respect to copyright ownership of all material at this site, and will enforce such rights to the full extent of the law.