One possible way to save money is to move to a state with no income tax. Taxes are a big part of most people’s budgets. In addition to taxes, you may have other reasons to relocate. Maybe you want to travel or live in another state for a while. You may need medical care. Or you may wish to live close to your children or grandchildren. Or you may simply don’t like the view out your back window. The reasons can be various. In this case, it is very important to get acquainted with the tax rules of the state where you will be moving.

As of 2021, seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — levy no state income tax․ Two others, New Hampshire and Tennessee, don’t tax earned wages.

However, you need to know something very well։ Other state taxes fill the revenue void․ States with no income tax often make up the lost revenue with other taxes or reduced services. Those without state income taxes find different means to pay for roads, schools and other infrastructure. Healthcare, cost of living, and job opportunities — are also important in determining how expensive a state is.

Florida, for example, levies a 6 percent sales tax, and the average locality tacks on 1.08 percent, according to the Tax Foundation, for a combined average of 7.08 percent. Alaska and Wyoming taxes natural resources, primarily oil, to make up for the lack of a personal income tax. In 2018 New Hampshire got nearly 64 percent of its revenue from property taxes — the highest rate of any state.

According to WalletHub, South Dakotans pay just 7.86% of their personal income in taxes, putting the state 11th in terms of the overall tax burden. The state ranks 14th in affordability and 20th in the U.S. News & World Report “Best States to Live In” list.

All of those extra taxes contribute to higher-than-average living expenses in some of those states. Washington, New Hampshire, Nevada, Florida and South Dakota were among the 24 states with the highest cost of living in 2018, according to data compiled by the Council for Community & Economic Research. Alaska is also among the most expensive places to live, but a big part of that is because it’s so remote.

If you want to be very tax-responsive, you should take into account all the types of taxes you may pay.

If you have any questions about this, you can get in touch with our accounting team at 323-538-5358 or write to us via