Although your state income tax isn’t going to be as high as your federal income tax, it can still be a burden on your shoulders. Here are the 9 states without the state income tax.
Even if you may think living in a state without income tax can have many benefits financially, the grass is only greener on the other side. There are reasons why we have 9 states without a state income tax.
List of States Without State Income Tax 2023
Tax Burden of Personal Income in Alaska: 5%
Alaskans do not pay state income tax or sales tax. The cost of living in Alaska is very high because of the state’s remote location. If state taxes were a thing in Alaska, the state would take the last spot in affordability. As of 2023, the tax burden of Alaskans is about 5% of personal income. It is the lowest of all 50 states.
Also, the Alaska Permanent Fund Corporation makes an annual payment to all Alaskans. The annual payment is believed to be $3,170 in 2023 which is $170 higher than last year. This sounds nice and all but given the harsh climate and the high cost of living in Alaska, life isn’t all that pretty even without the state income tax.
Tax Burden of Personal Income in Florida: 6.5%
With a large population of seniors and a welcoming climate, Florida is undoubtedly one of the best states to live in. Even though the state doesn’t impose any state income tax, the property and sales tax is very high in the state and this reflects on the housing costs. The cost of living, on the other hand, isn’t so bad in Florida but by no means, it’s a cheap place to live in.
The tax burden is about 6.5%. It’s is only 1.5% higher than in Alaska. However, unlike Alaska, Florida has a sales tax and it’s high. The sale tax rate is between 6% and 8.5% which is higher than in most states.
Tax Burden of Personal Income in Nevada: 8%
Home to many casinos and hotels, Nevada relies on high sales taxes. The taxes on alcohol, cigarettes, and gambling is the biggest revenue of the state. Because of this, there is an added tax (Sin Taxes) on anything that is considered morally hazardous to society.
Thanks to high sales tax rates on pretty much all types of items, there is no state income tax in Nevada. The state simply doesn’t need it because of the high sales tax. The overall tax burden of Nevadans is about 8% of income. But the high cost of housing and living makes it one of the least states when it comes to affordability.
Tax Burden of Personal Income in New Hampshire: 7%
New Hampshire just passed the legislation to eliminate state income tax for the next five years with a full elimination in 2025. The state also does not impose a sales tax in general but have taxes on alcohol. The overall tax burden of the state-imposed tax is 6.9%.
Sounds good but New Hampshire has the third-highest property tax rate in the United States with 2.2%. The state is the best state in terms of affordability in our list. And all and all, New Hampshire is the second-best state to live in according to the U.S. News & World Report.
Tax Burden of Personal Income in South Dakota: 7%
Home to several major credit card companies like Citibank, South Dakota relies on taxes from major corporations situated in the state. Also, just like Nevada, South Dakota has a high revenue from alcohol and tobacco products which ease the need for state-imposed income tax.
South Dakota doesn’t impose any tax to retirees on withdrawals from retirements accounts and on Social Security income tax. Overall, the tax burden of personal income in South Dakota is 7%. With a kind approach to retirees and low sales tax in general, South Dakota is one of the best states to live in on our list of states without an income tax.
Tax Burden of Personal Income in Tennessee: 6%
Although the state did not impose a state income tax, income earned from investments was taxable prior to 2016. Legislation passed the same year eliminated this. As of 2023, residents in Tennessee still pay unearned income tax but the rate is being lowered by 1 percent each passing year.
Tennessee is moving to a new direction where the taxes other than sales tax is becoming a less weight on residents. While the overall tax burden of personal income in Tennessee is slightly above 6%, the state ranks below the average in affordability.
Tax Burden of Personal Income in Texas: 8%
It is surprising to many but Texans do not pay state income tax. But the sales tax is considerably high on many products. Texas’ sales tax can even be above 8% in many jurisdictions. Being home to almost 30 million people, Texas relies heavily on the sales tax.
Despite being the state with the second-highest population, Texas forbids state income tax and manages to keep the cost of living relatively low. The tax burden of Texans is about 8.2% of their personal but given its size and the major industrial complex, life in Texas isn’t so bad.
Tax Burden of Personal Income in Washington: 8%
Same as all other states in our list, Washington’s infrastructure and services are mostly provided by the sales taxes. With high excise taxes and sales taxes, the tax burden of personal income is 8%. The high cost of living and housing pushes the state to the bottom of the list of affordability.
Just like in Tennessee, gasoline is very expensive because of the high tax. If what you earn is enough, Washington can be the best state to live in as it was ranked as such.
Tax Burden of Personal Income in Wyoming: 7.5%
With a population of only 580,000 people, Wyoming is one of the least densely populated states in the country. The residents of Wyoming enjoy low taxes in every direction. It has a considerably low sales tax and the state does not impose a retirement income tax. Wyoming also has no corporate state income taxes.
Since the state has a relatively low sales tax, the infrastructure and services are mostly provided by the tax on natural resources like oil and coal. With the overall tax burden of 7.5% of personal income, Wyoming is very relaxed in terms of taxes.