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2020s Most Tax-Friendly States


Written by Ashley Sutphin
Sunday, September 20, 2020

Retirees are often who we think of as moving from higher-tax states to states considered tax-friendly. For example, it’s common to see retirees moving from the Northeast, which is an expensive region not just in terms of taxes but also things like real estate and general cost-of-living, to the more affordable areas of Florida and the Southeast.

Now, the coronavirus pandemic has led younger people, many of whom are in their prime career years, to also look for low-cost places to relocate. Telecommuting has made it possible to leave big urban areas and work from anywhere, which is one factor behind the shift.

The following are some of the country’s most tax-friendly states right now, regardless of why you’re relocating.

Wyoming

Wyoming has a strong mineral and energy extraction industry, and that’s one of the reasons the state can keep taxes low for residents.

There’s no state income tax in Wyoming, and the average state and local sales tax is just over 5.3%. The average property taxes are $635 per $100,000 in home value.

The gas tax is also well below the national average.

Nevada

There is no income tax in Nevada, and the average property tax in the state is $693 per $100,000 in home value. The tax-friendly nature of Nevada may be one reason there’s an influx of California residents into the state and particular into the Lake Tahoe area.

The average state and local sales tax in Nevada is a bit on the higher side, at 8.14%.

Nevada receives over a billion dollars each year thanks to the casino and tourism industry, which helps them avoid a state income tax, although the coronavirus pandemic is likely to impact this.

Tennessee

In Tennessee, there’s a limited state income tax, which is 2% on interest and dividends.

The first $1,250 for individual filers of their taxable income is also exempt. The tax will be entirely gone by 2021 as it’s being gradually phased out.

Property taxes are pretty low too. You would pay around $3,072 per year for a home with a value of $400,000.

With that being said, the state and local sales tax rate is one of the highest in the country at nearly 9.47%, and Texas also has one of the highest beer taxes in the U.S. too.

Florida

Florida’s another state with no state income tax, but property taxes tend to hover around the national average.

The state and local sales tax rate is also somewhere around average for the country at 7.05% combined.

The gas tax is high too, but for the nearly year-round sunshine and warm weather, many people find it worth it, plus overall Florida is still considered pretty tax-friendly.

Alaska

Alaska may not provide you with sunshine and beaches, but it could be an economically sound decision.

Alaska residents pay neither state income taxes nor state sales tax. Certain municipalities in Alaska might impose sales taxes that are as high as 7.5%, but even so the average sales tax hovers around 1.76%.

There’s also something in Alaska called the Permanent Fund Dividend, which is paid to every resident of the state who’s lived there for a full year.

South Dakota

Finally, another tax-friendly option is South Dakota, with no state income tax and an average state and local combined sales tax of only 6.4%. Food and prescription drugs are also exempt from sales tax. Property taxes, however, are above average compared to the rest of the country.

What about the least tax-friendly states?

California has the highest individual state income tax rate in the nation. Other high-tax states include Oregon, Minnesota, New York, and New Jersey.



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