One of the most important factors to consider when starting a business is savings.
The key is to reduce expenses as much as possible because, less spending means more profitability.
People who already have well-established businesses often look to cut costs by moving to a state where there is no state income tax.
For retirees, this means enjoying the benefits of tax-free Social Security, pensions, and other retirement income sources.
These are the 9 U.S. states that don’t impose income taxes
First, I’ll list the states, and then I’ll provide you with the details:
1. Alaska.
2. Florida.
3. Nevada.
4. New Hampshire.
5. South Dakota.
6. Tennessee.
7. Texas.
8. Washington.
9. Wyoming.
As we explained in our article about the 5 states that don’t impose sales taxes, each state has different ways to raise funds.
Those without income taxes find other ways to cover state expenses.
For example, there’s the sales tax.
Alaska doesn’t have any sales tax. And if we talk about the tax rate, this state has the lowest rate (around 5.1%).
Florida imposes a 6% sales tax. In addition to this rate, local areas can add 1.08%, making a total of 7.08%.
In Nevada, there is a 6.85% sales tax. However, local sales tax rates can increase the total rate to 8.26%.
New Hampshire does not impose income or sales taxes. It is one of the 5 states without sales tax. So, this state generates its revenue through high taxes on alcohol, tobacco, gasoline, and tax rates around 1.89%.
The sales tax rate in South Dakota is 4.5%. When you add local municipality rates, the total can go up to 6.5%.
Tennessee has the highest combined sales tax rate of all U.S. states, at 9.55%.
In Texas, there is a 6.25% state sales tax on rentals, services, and retail sales. When you include local tax rates, the maximum combined rate could be 8.25%.
The eighth state is Washington, with a 6.5% sales tax rate. Municipalities in Washington can add up to a maximum of 3.9% to the tax rate. This state also imposes a tax of 49.4 cents per gallon of gasoline.
Lastly, in Wyoming, there is a 4% sales tax. When you include local taxes, it can go up to a maximum tax rate of 6%.
What’s the difference between state and federal taxes?
State taxes apply only to the state where you live or work, and it’s a tax you must pay on your income.
Then there are federal taxes that also apply to your income.
That means if you live within one of these 9 states, you won’t have to pay state taxes. However, you still need to file and pay federal taxes.
If you don’t live in one of these 9 states, you’ll have to pay both types of taxes.
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Contact us, and we will be happy to assist you.
