15 States That Tax Your Income the Least
Take home more of what you earn
Like it or not, taxes are a part of life. It’s not just the federal government that takes a portion of your money, however. Depending on where you live, you might lose a chunk of your income to state taxes as well. With that in mind, here are the states that will leave you with more of your hard-earned paycheck, courtesy of GOBankingRates.
Alaska is among the most tax-friendly states in the country because it does not impose an income tax or a sales tax. In fact, Alaska residents actually get paid to live where they do -- royalties from natural resources are shared with those who make Alaska their home. That said, the cost of living in Alaska is far from cheap -- it’s considerably higher than the national average.
There’s a reason retirees tend to flock to Florida. Sunny weather aside, Florida has no income tax, which means workers get to keep more of their paychecks and seniors keep more of their IRA or 401(k) withdrawals. Property taxes in Florida are relatively low as well.
Even if you're not drawn to its nightlife, you might choose to set up residence in Nevada regardless. That's because Nevada does not impose a state income tax, as it gets plenty of revenue from gaming. That said, Nevada's sales tax rate is on the higher side.
4. New Hampshire
With no income tax to show for, residents of New Hampshire can hang onto a larger chunk of their earnings. Throw in the fact that there's no sales tax either, and you'd think it would rank as one of the most tax-friendly states in the country. But not so fast -- New Hampshire's property taxes are among the highest nationwide, and though residents don’t pay taxes on job-related earnings, they are taxed on dividend and investment income.
5. South Dakota
Home to Mount Rushmore, South Dakota is another state that doesn't have an income tax. Furthermore, its sales tax is relatively low, making it an affordable place to live on a whole. In fact, its overall cost of living is lower than the national average.
If you live in Tennessee, you won't lose a portion of your paycheck to state taxes, but as is the case in New Hampshire, you will pay taxes on dividends and income from investments. Tennessee also has a relatively high sales tax -- but if you dig the music scene, it may be worth paying that premium.
Texas is among those states that don't impose an income tax, which means you get to keep more of your earnings. But living in Texas is by no means cheap. With both property and sales taxes being relatively high, you'll need to be mindful of your budget if you choose to reside in the Lone Star State.
Because Washington is able to generate revenue via its higher-than-average sales tax and gasoline tax, residents are spared an actual state income tax. Property tax-wise, Washington falls somewhere in the middle among the 50 states, but the cost of living in major cities like Seattle is notably higher than the national average.
Like wide, open spaces with plenty of room for your bison to graze? Then head on over to Wyoming, where you won't pay a dime in state income taxes. Coal mining revenue and hunting licenses alone help Wyoming stay afloat without having to impose a tax on residents' income.
10. North Dakota
Though North Dakota does impose an income tax, its rates range from just 1.1% to 2.9%, with the highest rates applicable to only the state's highest earners. Compared to the rest of the country, that 2.9% is relatively low, and property and sales taxes fall somewhere in the middle.
If you don't mind the heat, Arizona is a relatively tax-friendly place to live on a whole. Its state income tax ranges from 2.59% to 4.54%, though the latter rate applies only to the state's highest earners. Property taxes are relatively low in Arizona as well.
State taxes aren't so bad in Illinois -- but real estate taxes are a different story. Illinois currently imposes the second-highest property tax rate in the nation, lagging only behind New Jersey in this regard.
With its notoriously windy weather, Kansas has a state income tax rate ranging from 3.1% to 5.7%. Though this represents a notable increase from past years, it's still a relatively low state income tax rate overall.
Lower earners in Louisiana won't pay a lot of state income tax; but income in excess of $50,000 is taxed at a higher 6% rate. And while property taxes in Louisiana are fairly low, the state's high sales tax more than compensates in a not-so-good way.
15. Rhode Island
Income taxes in Rhode Island are low compared to the rest of the country, but the state is by no means tax-friendly. What residents gain by retaining more of their paychecks, they lose in the form of high sales and property taxes.
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