The IRS is the government body responsible for collecting income tax at the federal level. But it’s not alone. Individual states also collect tax on your employment, dividend and interest income.
Seven States Without Income Tax
Only seven states do not require the payment of income tax altogether. Here are these 7 states in alphabetical order:
According to the Tax Foundation, Alaska does not levy any individual income tax. However is does collect taxes at the corporate level and property taxes.
Florida does not levy any individual income tax. However it does tax corporation, collects sales taxes and property taxes. Against popular belief, this makes the overall tax burden of Florida comparable to the average tax burden in the united states.
Nevada, home of Las Vegas, naturally collect no income or corporate taxes. It has one of the lowest tax burden in the country.
The state of South Dakota is very similar to the state of Wyoming (lower in the article). It levies no individual or corporate income tax. However the property taxes are lower per capita which makes it one of the states with the lower tax burden in America.
Texas contains all the letters to for the word TAX, however it does not levy personal income tax at the state level. Again this is one of the states with the lowest tax burden. Yeehaw!
Washington state of the north west charges to income tax to its citizens. The local and state tax burden in this state is average when compared to all the other states.
The state of Wyoming has no personal income tax and no corporate income tax. The combined state and local tax burden is one of the lowest in all 50 states. In 2011, Wyoming’s tax burden was the lowest in the United States.
Most of these states are among the top-ten state who have the lowest overall tax burden… but not all! Read below to find out why.
Two states have partial income tax for individuals. These two states tax only distribution income from investments (dividend and interest):
- New Hampshire
In the 41 other state, you will be required to fill an income tax report and pay your dues.
No State Tax Mean More Money In My Pocket? Not Necessarily…
No paying taxes at the state level is usually a good sign that we will finish the year keeping more money in the bank. However, states are very creative in finding ways to fund themselves.
Some states such as Texas and New Hampshire have high property taxes. You will pay yearly taxes on the value of your home and your other real-estate properties.
In most state you will pay a mix of property taxes, tax on gas, sales taxes. When adding up all the different taxes, some states with no income tax still manage to charge more tax overall than other state who collect income tax.