Residents of these states do not pay income tax


Image source: Getty Images

Most US states have an income tax. The exact tax residents pay varies from state to state. Some states have a flat tax rate for all residents, while others may have progressive tax rates that vary by income level.

It’s tax season, so many Americans have income tax on their minds. In addition to paying federal income taxes, most people in the United States pay state income taxes. For this reason, during tax season, most Americans file federal and state income tax returns.

However, some Americans may not be required to file an individual tax return, particularly if they live in a state that does not tax earned income.

Residents of the following states do not pay state taxes on earned income

If you are considering moving elsewhere, you may be considering moving to a state with no income tax or moving to a state with a more affordable income tax rate.

Residents of the following states do not pay state income tax on earned income:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Tennessee
  • Texas
  • Wyoming

There are two states which do not withhold tax on regularly earned income. However, residents of the following states may be liable for other state-imposed taxes:

  • New Hampshire requires residents to pay a 5% tax on interest and dividends only. Recent legislation has begun to phase out this tax, and it will be repealed as of January 1, 2027.
  • Washington recently passed a law that requires resident individuals to pay a 7% tax on the sale or exchange of long-term capital assets if profits exceed $250,000 per year. This law entered into force on January 1, 2022.

Could moving to a state with no income tax save you money?

Although moving to a state with no income tax may reduce your income tax, your savings may not be so noticeable. Most states with no income tax generate income in other ways. This may include imposing higher property and sales taxes.

It should also be noted that some states have a higher cost of living. For example, while Alaska has no income tax, it is expensive to live there.

If you’re wondering where to live and want to make a choice that will have a positive impact on your personal finances, be sure to consider all living expenses, including rental and housing costs.

Federal tax returns are due April 18

No matter where you live in the United States, April is right around the corner. If you haven’t filed your federal or state tax return yet, you’ll want to plan to start soon.

The federal tax shift deadline for 2022 is April 18. If you are responsible for filing a state tax return, be sure to check your state’s filing deadline this year.

Filing your tax return doesn’t have to be difficult. Using tax software can make the filing process less stressful. Check out our list of the best tax software to find the right software for your needs. You can also check out our other tax articles for tax tips.

The best credit card cancels interest
If you have credit card debt, transferring it to this superior balance transfer card can pay you 0% interest for 18 months! It’s one of the reasons why our experts rate this card as a top choice to help you control your debt. This will allow you to pay 0% interest on balance transfers and new purchases during the promotional period, and you will not pay any annual fee. Read our full review for free and apply in just two minutes.

We are firm believers in the Golden Rule, which is why editorial opinions are our own and have not been previously reviewed, approved or endorsed by the advertisers included. The Ascent does not cover all offers on the market. The editorial content of The Ascent is separate from the editorial content of The Motley Fool and is created by a different team of analysts. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source link


About Author

Comments are closed.