Relieve me of the burden of taxes!
June, 26 2014 by Carol Thompson, EA
Tired of feeling like the government is taking your last penny? Having trouble making ends meet? There is a solution – provided you are willing to move. While you cannot escape Uncle Sam, there are a number of states that do not have an income tax, others that do not have sales taxes, and some that at least allow you your pension in peace. How do the states break down?
No State Tax: The following states do not have state income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington (the state, not the city) and Wyoming. New Hampshire and Tennessee tax dividend and interest income, but not earned income.
Too hot? Too cold? Not into the desert or the humidity? Well, somewhere, there is a state to meet your needs.
No Tax on Retirement: As of 2014, 37 states and the District of Columbia do not tax Social Security. Here is a list of states that do not tax other types of retirement funds. You can also check the taxability of your work pension, military pension, private pension, or government pension.
No Sales Tax: There are several states where you can shop without the additional burden of sales tax, including: Alaska, Delaware, Montana, New Hampshire, and Oregon. However! If you shop in a tax-free state but don’t live there, your state will generally charge you an “excise” tax on those products.
The excise tax applies to purchases made during trips across the border from Vermont to New Hampshire to visit the state-run liquor stores at all major entrances and exits in New Hampshire.
Excise tax (otherwise known as use tax) will also be charged on Californians who run over to Oregon to pick up supplies at Staples or Lowes. (The state’s Franchise Tax Board will charge excise tax on any purchase out of state that it finds out about which was charged at a rate below CA’s rate.)
You Might Want to Stay Away! Minnesota, Nebraska, Rhode Island, and Vermont allow no exclusions for any type of pension or retirement income.
No Property Tax: This is another way to save money – but is harder to calculate. According to a study done by the non-profit Tax Foundation using census statistics, the states that charge little or nothing in property taxes include the following list. The calculation compared property taxes as a percentage of the value of homes occupied by the owner.
The top ten states in order of the smallest property taxes are:
- Louisiana 0.18%
- Hawaii 0.26%
- Alabama 0.33%
- Delaware 0.43%
- West Virginia 0.49%
- South Carolina 0.50%
- Arkansas 0.52%
- Mississippi 0.52%
- New Mexico 0.55%
- Wyoming 0.58%
The worst?
- New Jersey 1.89%
- New Hampshire 1.86%
- Texas 1.81%
- Wisconsin 1.76%
- Nebraska 1.70%
- Illinois 1.73%
- Connecticut 1.63%
- Michigan 1.62%
- Vermont 1.59%
- North Dakota 1.42%
Bottom Line: If you are looking for a place to stretch your retirement dollars, or looking for a place to save more money towards retirement, take a look at the lists above before making any decisions. A state with no income tax has to make money somewhere, and not all states sell liquor like New Hampshire. Be careful to do your research before you jump. How many times have you heard someone say, “It seemed like a good idea at the time!”
Here is a list of the best and worst states for property taxes.
