When it comes to federal income taxes, it doesn’t matter where in the country you live – everyone is taxed the same.
But state taxes, including income tax, sales tax, property tax, excise taxes, gasoline tax, and licensing fees, can be vastly different depending on where you choose to live.
Most people select a community because of jobs, friends, relatives or lifestyle – few people decide to live in a particular state solely for tax reasons.
But if you are considering moving, become familiar with all of the various taxes in the state to which you are planning to move.
Income tax is important, but it is not the only consideration. Is there a sales tax?
Sales taxes take a big bite out of the income you spend on goods and services in all states except Delaware, Montana, New Hampshire, and Oregon. California boasts the highest sales tax in the country.
Find out what the sales tax rate is for the state and city you are considering, and what goods and services are taxed. If drugs, food, and services are free of tax, you’ll save money over the long run.
Compute the income, sales, and property taxes you would pay in a typical year on your anticipated income and expenditures for each locale you are considering.
Adding all taxes together will give you a clear picture of whether you are moving to a tax-friendly or tax-fierce state.
There are seven states that do not have an income tax. They are:
- South Dakota
On the other end of the scale, the states with the highest state income taxes include:
Adding local income taxes makes New York a high income tax state as well.
But some states that don’t impose an income tax have other taxes. For example, Florida imposes an intangibles tax on stocks, bond, and certain other investments.
Local municipalities and counties may impose their own income taxes, so relocating from one place to another within the state can affect your net income.
All states impose property taxes, but Alaska imposes no property tax on those over sixty-five.
Taxes on the value of real estate are set by the county or township in which the real estate is located. Since these rates and assessments vary widely, you’ll want to check these out thoroughly before buying a new residence.
The lowest property tax rates are in:
- New Mexico
- West Virginia
For California residents, Proposition 13, which permits only minuscule increases in property taxes each year for longtime home owners, has kept their property taxes low as well.