Are you ready to move to any of the cheapest cities to live in the United States? Together with housing, healthcare and food costs? It is very necessary to consider state taxes when looking into the entire cost of living of a place to call home.
While taxes are easy to overlook, they can be a major expense. The three popular types of taxes that lots of states impose on residents include sales tax, income tax, and rea estate tax. Money gotten from these taxes finance important services, like public schools and infrastructure development. While necessary, these expenses can greatly increase in tax season.
Luckily, for anyone hoping to save money, not all state governments mandate payment of high taxes. In fact, many states don’t charge particular taxes at all on residents. Those residing in tax-costly states, on the contrary, may have a difficult time saving money.
In fact, as mentioned by WalletHub, taxpayers who reside in high-taxes state pay three-times above people living in the cheapest state.
If you are searching for cost-effective means without lifting a finger, try moving to one of the low-taxes states in the United States discussed in this post.
To know which states charge low to no taxes on residents, read our overview below.
Lowest-Taxes States in each Category
Each state charges various rates for each type of tax. One of the perfect analyses of state tax burden data is provided by WalletHub. It converts the property and sales taxes of each state to a percentage of the normal income of the taxpayer, giving you the chance to make apple to apple comparison considering the overall percentage of taxpayer income collected in every state. However, first, let’s discuss each of the major tax types.
States that Charge No State Individual Income Tax
What is individual income tax? Most of the states in the United States impose a personal/individual income tax on residents. These taxes are deducted from the salary, wages and other source of income of residents.
For household that earn high income, residing in a state that doesn’t charge personal income tax can be a huge plus. Just know that states that charge low income taxes often make up for it by increases taxes in another way, like, for instance, by having high sales or property taxes.
Below are the seven states in the U.S. that doesn’t charge state personal income tax:
- South Dakota
Together with these seven states, Tennessee and New Hampshire have no tax on earned income. However, the states charge tax on income from interest and dividends, so, not everyone is free from this.
States that have Lowest Property Tax Rates
Do you know what property tax is? The United States Department of the Treasury mentioned that each of the states in the country have different definitions of property that is taxable. Some states let towns or local counties to tax real estate, which includes buildings like land, homes, buildings, and so on. Some states also let municipalities to tax individual property (such as boats, cars, airplanes, and so on).
Property taxes are a percentage of the value of your home that you pay every tax season. This percentage often funds public schools, public transportation, road construction, pensions and other local services.
Even though property tax rates vary from one county to another, you can find out the state with the cheapest total property taxes by checking the average property tax rate of each state.
Here, we’ve mentioned the 10 states in the country with the cheapest average property tax rates, with the ranking starting from the lowest to highest as reported on tax-rates.org.
- Louisiana: .18%
- Hawaii: .26%
- Alabama: .33%
- Delaware: .43%
- District of Columbia: .46%
- West Virginia: .49%
- South Carolina: 50%
- Arkansas: .52%
- Mississippi: .52%
- New Mexico: .55%
Property taxes in the Northeast as well as Midwest can be higher. The ten states in the country with the highest average property tax rates include Vermont, Illinois, Michigan, Texas, New Jersey, Connecticut, Wisconsin, North Dakota, New Hampshire, and Nebraska.
States that doesn’t Tax State Sales
Do you know what sales tax is? It is defined by the U.S. Department of the Treasury as a tax charged on the sale of goods and services. Sales tax is in three form, which include vendor tax, the consumer tax, as well as vendor-consumer tax. Only five states in the country don’t have a sales tax.
These states are:
- New Hampshire
Even though Alaska don’t charge state sales tax, the state, however, allows local counties to tax local sales on residents. While majority of states indeed charge state sales tax, most of these tax rates are low.
The data from The Tax Foundation shows that states that charge low state sales tax are:
- Colorado (2.9%)
- Alabama (4%)
- Georgia (4%)
- Wyoming (4%)
- Hawaii (4%)
- New York (4%)
- Missouri (4.23%)
- Louisiana (4.45%)
- South Dakota (4.5%)
- Oklahoma (4.5%)
- North Carolina (4.75%)
Certainly, when looking into sales tax, you importantly need to remember local sales tax rates too. Together with the state sales tax, these rates can amount to huge sum really quick. Data from The Tax Foundation shows that only five states charge highest median combined state and local sales taxes.
- Tennessee (9.47%)
- Arkansas (9.47%)
- Louisiana (9.45%)
- Washington (9.21%)
- Alabama (9.16%).
States that charge the lowest average combined rates include:
- Alaska (1.76%)
- Hawaii (4.41%)
- Wyoming (5.32%)
- Wisconsin (5.44%)
- Maine (5.50%).
9 Best States that have the Lowest Total Tax Burden
Before deciding to live in a particular state and hire a mover to one of the affluent lands, check these ten (10) states that have the lowest total tax burden:
1. South Carolina
- Median state tax burden: 7.48%
- Property taxes: 2.88%
- Incomes taxes: 1.98%
- Sales and excise taxes: 2.62%
This state charges all three main state tax types but doesn’t do it without proper moderation. South Carolina’s sales and excise tax burden is 2.62%, which is actually low compared to similar states. That makes this state’s overall tax burden to be 7.48%, or a yearly tax loss of $5,161 for the average-income family. Long coastline, and a lot of historic charm in its cities (like Charleston), large agricultural lands, and the beautiful Blue Ridge Mountains, all comes together to make this state attractive to call home.
- Median state tax burden: 7.36%
- Property taxes: 1.43%
- Incomes taxes: 1.88%
- Sales and excise taxes: 4.05%
Even though Alabama charges all three taxes, it has the lowest property tax burden in the country at 1.43%. Income taxes are moderately low as well, at 1.88%, but the state of Alabama charges high taxes on sales and excise, at an average of 4% of income. All these keeps the overall tax burden of the state one of the lowest 10 states in the United States. Alabama has a coastline towards the Gulf of Mexico and a lot of amazing small cities, like Mobile, Huntsville, Birmingham, Montgomery, and Auburn.
- Median state tax burden: 7.22%
- Property taxes: 3.51%
- Incomes taxes: 2.47%
- Excise taxes:1.24%
Montana doesn’t charge sales tax, helping to maintain lower overall tax burden. Property taxes in Montana are above the average, at 3.51 of income. Income taxes in Montana are also a bit above the national average at 2.47%, but excise taxes are only 1.24 of income. Despite this, Montana’s overall tax burden is at 7.22%. An average household would pay $4,982 in state income, excise and property taxes. Montana is beautifully amazing in the summer. Winters are severe, but those searching for a modern ‘wild west’ vibe will get it in abundance by the state’s wide tracts and unlimited skies.
- Median state tax burden: 6.94%
- Property taxes: 1.65%
- Incomes taxes: 1.79%
- Sales and excise taxes: 3.50%
Oklahoma charges all three types of tax. Yet, the overall tax burden is still low because of low property tax rates as well as low income tax rates. Average resident of the state can plan to pay 1.65% of their salary in property taxes, 3.50% in sales and excise taxes, and 1.79% income tax. The overall tax burden of the state is 6.94% of income. For an average income household that amounts to $4,789 per year taxes. Oklahoma is popular for its flat agricultural land and it offers a few medium-sized cities too. Oklahoma City’s population is around 1.5 million, and the Tulsa metro area is almost 1 million residents.
5. New Hampshire
- Median state tax burden: 6.85%
- Property taxes: 5.57%
- Incomes taxes: 0.08%
- Excise taxes: 1.20%
This is another state that has no income tax on earnings of its residents, but does charge taxes on income made through investments. To make the deal further attractive, New Hampshire is one of the 5 states in the country that charge no sales tax. That implies that the state surely has to source for that revenue somewhere else. In this situation, residents of New Hampshire pay an average (above the national average) 5.57% of their income to property taxes, together with 0.08% in median income taxes, including 1.20% in excise taxes.
Its overall tax burden now comes to 6.85%. That implies that an average household p4ays about $4,727 in property, excise and income taxes altogether. New Hampshire is filled with mountains and fall foliage, together with little New England coastline. Benefit of its plentiful nature with over 90 state parks and cheaper skiing than its popular neighbor, Vermont.
- Median state tax burden: 6.82%
- Property taxes: 2.79%
- Incomes taxes: 0%
- Sales and excise taxes: 4.03%
Without charging income tax, the typical resident of Florida pays property taxes of 2.79% and 4.04% sales and excise taxes from their income. That amounts to an overall tax burden of 6.82%. For an average household, that makes a total of $4.706 in yearly taxes. The warm climate, wide coastline, beautiful beaches as well as low tax burden all make Florida an attractive destination for snowbirds and retirees.
Considering a move to Florida? Read our guide on Moving to Florida: Best Things To Know Before Moving
- Median state tax burden: 6.18%
- Property taxes: 1.92%
- Incomes taxes: 0.08%
- Sales and excise taxes: 4.18%
Tennessee doesn’t charge income tax on regular earning, as well as a small tax on income generated on investments. The overall tax burden is also reduced by the low property taxes. The median resident of the state pays property taxes of 1.92%, income taxes of 0.08%, and a huge 4.18% sales and excise taxes from their income. However, among the three major tax types, sales tax is easily avoidable and reduced.
Tennessee’s overall tax burden is 6.18%, which implies that $4,264 will be paid in sales taxes for a typical household that earns $69,000. Tennessee offers a lot of cities either Delaware or Alaska, from Memphis to Nashville, and Chattanooga to Knoxville. It also has wide rural countryside and mountains, which include the Great Smoky Mountains.
- Median state tax burden: 5.52%
- Property taxes: 1.85%
- Incomes taxes: 2.47%
- Excise taxes: 1.20%
Charging no sales tax, together with cheap income and property taxes, Delaware charges the second lowest overall tax burden on residents. The average resident of Delaware pays 1.85 as property taxes, 2.47% as income taxes, and 1.20% as excise taxes from their income. That amounts to a 5.55% overall tax burden.
A home that is earning $62,000 would pay state taxes of $3,441. For employers, Delaware’s corporate tax rates are relatively low. Delaware also has amazing beaches as well as rustic farmland. Its location enables easy access to three main cities (Baltimore, Washington D.C., and Philadelphia), and is just about 2 hours away from New York City.
- Median state tax burden: 5.16%
- Property taxes: 3.71%
- Incomes taxes: 0%
- Excise taxes: 1.45%
This state offers the lowest tax burden of all the states in the country, setting taxpayers back on an average of 5.16% of their income. The breakdown of that is that they pay an average of 3.71 to property taxes (the 12th highest in the country), 0% to income taxes, and 1.45% to income heading to excise taxes all deducted from their income.
Not charging income taxes makes a huge difference, as Alaska is one of the 7 states that doesn’t charge income tax at all. In fact, Alaska is the only state that doesn’t charge sales tax and no income tax as well, together with investment income. Definitely, not everyone loves Alaska weather. But for people who don’t mind being a bit isolated from the rest of the world, it makes a really great place to reside.
Even though taxes may not be the number one thing to consider when choosing where to reside, understanding the tax conditions of the place you are choosing for a move could assist you in long run, especially when you are retiring. If you no more want to pay high taxes, try moving to one of the low-tax states highlighted above.
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