{"id":4724,"date":"2021-02-23T13:21:45","date_gmt":"2021-02-23T13:21:45","guid":{"rendered":"https:\/\/moving.tips\/?p=4724"},"modified":"2021-02-23T13:21:47","modified_gmt":"2021-02-23T13:21:47","slug":"moving-to-a-state-with-no-income-tax","status":"publish","type":"post","link":"https:\/\/moving.tips\/bonus-tips-and-tricks\/moving-to-a-state-with-no-income-tax\/","title":{"rendered":"Is moving to a state with no income tax a good idea?"},"content":{"rendered":"\n

Taxes are quite annoying – especially income tax as it directly takes away from your hard-earned money. Unfortunately, there is no way to avoid paying federal income tax. It is, however, possible not to pay state income tax – if you live in a state with no income tax.<\/p>\n\n\n\n

There are several states in the US that don\u2019t have income tax – and moving to one of these states sounds like a very good idea. Every year, more and more Americans are relocating to states with zero income tax, hoping to reduce their overall tax obligation – and, thus, to keep more money in their wallets.<\/p>\n\n\n\n

While not having to pay income tax certainly boosts take-home pay, however, there\u2019s usually a trade-off – states without income tax often have higher sales or property taxes and <\/strong>more expensive or lower quality public services.<\/p>\n\n\n\n

So, if you\u2019re thinking about moving to a state with no income tax, you need to understand how things work there first – and how it will affect you and your family.<\/p>\n\n\n\n

Here is everything you need to know in order to make an informed decision about moving to an income-tax-free state:<\/p>\n\n\n\n

Which states have no income tax?<\/h2>\n\n\n\n

Most states in the US levy a tax on income – some have a flat-rate income tax, while others have graduated rates based on income levels. The revenue from income taxes is used to fund public services such as transportation, health care, and public education.<\/p>\n\n\n\n

There are a few states, however, that try to attract talented workers, draw new businesses, create jobs, and retain young people by cutting the income tax.<\/p>\n\n\n\n

So, how many states don\u2019t have income tax and which are they?<\/p>\n\n\n\n

As of February 2021, there are eight states with no income tax whatsoever – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. There is also one state – New Hampshire – that doesn\u2019t require residents to pay tax on earned income, but levies taxes on dividends and income from investments.<\/p>\n\n\n\n

Pros and cons of moving to a state with no income tax<\/h2>\n\n\n\n

Moving to a state with no income tax seems like a smart financial decision – if you live in a place where earnings are not taxed, you will be able to keep more of your paycheck. This, however, doesn\u2019t necessarily mean that your financial situation will improve. As beneficial as living in a state without income tax may be, it\u2019s not without its pitfalls.<\/p>\n\n\n\n

Benefits of moving to an income-tax-free state<\/h3>\n\n\n\n

The biggest advantage of moving to a state with zero income tax is quite obvious – you don\u2019t have to pay state tax on your income, so you get to keep more of your hard-earned money. This is especially beneficial if you have a higher income.<\/p>\n\n\n\n

In most states, income tax is based on a bracketed system with different rates applicable to people with different income levels, meaning that higher earners pay higher taxes. In a state without income tax, however, high earners won\u2019t have to pay any income tax at all – so they will be able to save much more of their money.<\/p>\n\n\n\n

People with lower income will also keep more of their paycheck, of course, but the difference in their take-home pay won\u2019t be so substantial.<\/p>\n\n\n\n

According to recent reports, over the past decade the nine income-tax-free states have consistently outperformed all other states in terms of GDP growth, employment growth, and in-state migration.<\/p>\n\n\n\n

Related:<\/strong> Top 7 factors to consider when deciding where to move next<\/a><\/p>\n\n\n\n

Drawbacks of moving to a state with no income tax<\/h3>\n\n\n\n

States that don\u2019t have income tax need other sources of revenue in order to fund public services – so, they usually raise other taxes. They also tend to provide lower quality services and more expensive higher education.<\/p>\n\n\n\n

Texas and New Hampshire, for example, have exceptionally high property taxes. Tennessee has one of the highest sales tax rates in the country and Washington charges extra on groceries and gasoline.<\/p>\n\n\n\n

So, if you move to a state with no income tax, you\u2019ll be paying more for housing, goods, and services – and even though you\u2019ll keep more of your income, you may not be able to save more of your money. The amount you\u2019ll be paying toward sales and property taxes could, in fact, be higher than the amount you would pay toward taxes overall in a state that has an income tax.<\/p>\n\n\n\n

It\u2019s also very important to note that sales taxes don\u2019t change depending on the income level of the consumer – everyone pays the same tax, regardless of how much money they make. This places an inequitable burden on lower earners who need to devote a big chunk of their take-home pay to buying things that are subject to sales taxes. Wealthier people are much less affected by sales taxes, as they spend a much smaller proportion of their income on living expenses.<\/p>\n\n\n\n

So, if you don\u2019t make much money, moving to a state with no tax income may not be beneficial for you at all. And if you\u2019re moving without a job<\/a>, it may be difficult to find employment in your new area, since job growth lags behind population growth in most zero-income-tax states.<\/p>\n\n\n\n

On top of it, you may need to pay more for education and other public services or the provided services may not be good quality.<\/p>\n\n\n\n

Good to know:<\/strong> Keep in mind that even if you move to a state with no income tax, your earnings may still be taxed:<\/p>\n\n\n\n