What?
Whether you're considering a move for retirement, a new job, or remote work, understanding tax-friendly states is highly informative.
States with Low Overall Tax Burden
The overall tax burden combines property taxes, sales taxes, excise taxes, and individual income taxes. Here are the top 10 states with the lowest total tax burden [1]:
Rank | State | Total Tax Burden |
1 | Alaska | 5.06% |
2 | Delaware | 6.12% |
3 | New Hampshire | 6.14% |
4 | Tennessee | 6.22% |
5 | Florida | 6.33% |
6 | Wyoming | 6.42% |
7 | South Dakota | 6.69% |
8 | Montana | 6.93% |
9 | Missouri | 7.11% |
10 | Oklahoma | 7.12% |
States with No Income Tax
These states do not impose state income tax, which can significantly reduce your tax burden, especially in retirement [2]:
Alaska
Florida
Nevada
South Dakota
Tennessee
Texas
Wyoming
Although New Hampshire does not levy taxes on most forms of earned income, it currently applies a 3% tax on dividends and interest as of 2023. In 2024, this rate will remain at 3%, but the state has plans to completely eliminate this tax by 2025 [3]. Washington also does not have state income tax but levies a long-term capital gains tax rate of 7% on assets that were sold for a profit of $250,000 or more [4]. Note that Texas is one of the top 10 tax-friendly states according to Kiplinger, but could not make the top 10 for the lowest "overall" tax burden.
So What?
Understanding the overall tax burden is crucial. While no state income tax is an attractive feature, it's essential to consider how other taxes might affect your total tax liability. For example, some states with no income tax may have higher property or sales taxes, which could offset the benefits of no income tax.
Now What?
Evaluate Holistically: Look at all types of taxes to understand the true tax burden.
Balance Factors: Consider how the tax benefits align with other living costs and personal preferences.
Think Long-Term: Choose a state that not only offers tax advantages but also meets your lifestyle and future needs, such as housing and healthcare.
Selecting a tax-friendly state in 2024 requires a comprehensive understanding of the overall tax burden. We encourage you to consider all aspects of taxation and how they align with your personal needs and financial goals.
Comentários