As Bloomberg noted in the first quarter of 2023, a $300,000 salary—in this day and age—feels more like a $100,000 salary. This is especially true in the most expensive cities in the United States. Recently, the high costs of living and high tax rates have inspired companies, employees, and families to make a move from super expensive regions to ones that are much friendlier on the wallet. Architectural Digest notes that in the year 2023, driven by affordability, jobs, and safety concerns, 39% of GenZ and Millenials have recently relocated. Typically, affordability is the top reason people move out of their home state, and friendly tax policies in some states can be quite attractive. Read on to learn more about what every business owner needs to know about states with no income tax.
Not every state has the same rate. You already knew this. But there’s a distinct advantage to living in an income-tax-free state. There are several federal income tax rates, and your taxable income and filing status affect which tax bracket applies to you. In some states, residents are not required to prepare and file a state income tax return.
Which states are income tax-free? You’re in luck. Seven states in the US don’t have an income tax, including Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two more states—New Hampshire and Tennessee—don’t have income tax on earned income, but these states tax dividend and interest income. Both New Hampshire and Tennessee have plans to be income tax-free by 2025.
It’s not all free. While you may not have to pay taxes on your income, you will still be subject to other taxes, such as property taxes or sales tax. No income tax doesn’t necessarily mean a lower cost of living. Although Alaska has the lowest tax burden in the US, it also has one of the country’s highest costs of living. Nevada tends to offset costs by collecting revenue from casinos; New Hampshire has one of the highest property tax rates in the country. Washington happens to have some high housing prices and an expensive cost of living as well. It’s good to do a bit of footwork on what your budget will be like if you’re relocating to a state with no income tax.
Tax money has to be generated somewhere. State and local governments get most of their revenue to fund public services such as education and health care through other taxes like sales tax and property tax. States that rely on natural resources like oil, natural gas, and coal for some of their revenue may need to ride out the boom and bust cycle of these industries.
Plan for the future. Retirement planning is so important for working people of any age. If you’re close to retiring, you will want to consider how state taxes may affect your retirement income. Some states tax retirement income, which can impact your finances during retirement.
Be aware of the economic environment. In a state with no income tax—and any place you may be considering relocation— look at opportunities in the job market, industries, and housing. Having limited prospects can be frustrating, and a robust economy is certainly preferable. Be sure that saving on taxes is worth the economic opportunities available to you.
The great state of Texas is not a big fan of taxes. In 2019, Texas voters decided to implement a constitutional state-wide ban on state income tax. The Dallas Morning News reported that The Governor of Texas praised the passage of Prop 4 for its influence on keeping a prosperous economy and maintaining Texas as a great place to live, work, and raise a family.
Take a closer look at the Texas economy. There are so many towns in Texas that are good for business. Fairview is one example. The Fairview Economic Development Corporation helps develop and nurture a diverse, vibrant economy consistent with the values and goals of the local community. They work to establish and execute strategies to recruit new businesses and to support the growth and development of existing businesses.
Look into the town of Fairview. With both large homes on acreage as well as urban living, Fairview offers plenty of opportunities for business alongside a great quality of life. More than 450 acres of green space are available in the 800-acre commercial planned development district in Fairview. It’s truly a great place to live, work, and play. Incorporated in 1958, this Collin County community has grown tremendously; it’s a unique town in the Dallas-Fort Worth Metroplex that balances big city life and small town charm.
If you’re seeking a relocation to a state with no income tax, the business-friendly environment of the Town of Fairview in Texas can offer major corporations and small businesses the kind of connections needed to succeed and grow. Learn more from the Fairview Economic Development Corporation here.