Did you know these states have some of the lowest taxes in America?
While we all do our best to both understand taxes (be they high or low) and be on top of the game when it comes to yearly changes that may occur, we cannot deny that there is something appealing about living in a state that has low taxes. And if you are already looking forward to your golden years or you have already retired, and you are open to relocating, why not choose a state that will make you pay less in taxes?
The tax burden is something every American household experiences, no matter how wealthy they are. And when you end up living on a retiree income, it becomes even more obvious just how much of your money goes towards taxes every year. This is why we have gathered some of the taxes with the lowest rates (income, sales, and property). They are expressed in percentages of a typical taxpayer’s income, so it can be easy for you to apply them to your own income.
If you are only curious about which states have the lowest taxes or you are actively looking for a place to relocate, we are sure you will find this list an interesting read!
Is your home state one of the ones with the lowest tax burden?
When it comes to income tax, Floridians are some of the lucky people in America, as the state does not charge an income tax at all. And to make matters even better, they also have no inheritance tax. Despite these perks, they do still have other taxes that people have to keep in mind, including some of the higher sales and excise taxes (3.87%), which puts them in position 16 out of all the American states.
Otherwise, people who have been living in Florida are also used to some pretty mid-tier property taxes, which are about 2.77%, and make them the 28th in the nation when it comes to this type of tax!
Overall, Florida is still one of the best states when it comes to the tax burden, as when you add everything up, a median household will end up paying around $4,483 in taxes each year, with an average tax burden of 6.64%.
While it is still a significant number, it is not as bad as other states, and people who live here can attest that it is one of the places where retirees are the happiest!
#5 New Hampshire
Despite New Hampshire not seeming to have the same kind of deal when it comes to taxes as Florida, it places itself above them when it comes to how much each household pays on average. The state actually has a lot of perks, with a lot of taxes not being collected as per state law, and this makes it pretty attractive to most people who are considering moving to the quaint state.
They have no income tax on what someone earns, and while they still do tax investment income, the state is scheduled to reduce it to 0% by 2027. What’s more, the income tax ends up being extremely low (0.14%), and it is one of the five states that has no sales tax rate!
Where New Hampshire residents are feeling a little bit of that tax burden is when we are talking about property taxes; it is the third highest tax on property as it is made up of a percentage of the income. Even so, while the property tax does reach 5.11%, New Hampshire is a state that has no sales tax, almost no income tax, one of the modest excise taxes, and no estate tax, which makes it one of the most attractive states to people who are looking to move to relieve some of that tax burden.
With an average of $4,328 paid in taxes each year by a median household, it’s hard not to see why! Especially since if you’re one that is not too fond of bustling cities, this picturesque mountain state with gorgeous fall foliage is the one for you. It isn’t always about the low taxes but a combination of what else the state offers!
If you’re too excited about the mountain ranges of New Hampshire, then Wyoming may be the state for you. With beautiful landscapes and sprawling ranches, it still doesn’t have a lot of cities that are huge and bustling, so you can have a quiet experience in the state. When it comes to states, it has fewer taxes than the previous two, and yes, they also have no state income tax.
When we look at the rest of them, they are quite moderate, with only a 3% tax on sales and excise. Yet, much like how the other two were, the property tax may be a bit of a burden when we look at other states. Wyoming residents who own properties pay about 3.32% in taxes, which puts the state at the 15th highest in the nation.
It is not that much when you take into consideration that there is no estate tax and no state gift tax. And when the average household pays about $4,267 in taxes annually, it does deserve its place on our lowest tax list!
When it comes to affordable taxes on income(3.2%) and property(1.77%), Delaware is deserving of its third lowest tax burden placed on the list. When coupled with the no sales tax, it becomes one of the states that has been intriguing to people looking to move in order to relieve the tax burdens.
Not to mention that it is full of beautiful beaches and has a rustic feel that most people will love. with the added benefit that anyone can reach major cities like Baltimore, Washington D.C., Philadelphia, and New York in about two hours!
If we look at the median US income for a family, which is around $67,521, a resident of Delaware would only have to pay $4,200 in taxes each year. which is probably going to be relatively lower when we look at a retired couple!
The only drawback to the State of Delaware is the fact that they do have a long-term capital gain tax, which has a rate of 6.6%. Yet, they do not charge estate taxes, and since they advertise no sales tax, you will have a hard time finding local governments that charge it around the state.
Tennessee has recently become a point of interest among retirees since it has phased out what was called a “hall tax,” which used to tax income coming from investments. This has been the state government’s attempt to attract retirees, and they seem to have managed to do just that. What’s more, the state has no income tax on regular earnings and no estate or capital gains tax.
To make the state even more attractive and worthy of its place on this lowest tax list, they have a low tax on property, which manages to bring down the tax burden by a lot. While housing may be a little harder to find, the state is still the fifth lowest when it comes to the overall cost of living, and with the low taxes, it makes it a state you should definitely have on your radar if you want to relocate!
#1 Lowest tax burden: Alaska
When it comes to offering the lowest taxes overall, Alaska wins the race. The average household tax burden, when you look at how much the average household pays, is not as much when compared to the other states in America, coming up at an average state tax burden of only 5.06% of yearly income. As the state is the only one that has both no income tax (including income coming from investments) and no sales tax, it is one of the most sought-after when it comes to low taxes.
When people see an increase in the tax department, it is when we look at property tax, which is the 11th highest in the nation at 3.54%. They also have special taxes for certain goods, such as tobacco, gasoline, and alcohol, as well as special local sales taxes that municipal governments enact.
Despite this, the complete lack of income taxes makes Alaska very appealing to most people looking to relocate, especially retirees. The one thing that stops most people from making the move is the fact that the weather is not the most appealing, especially if you come from a sunny state. Yet, if you can get over this aspect, the state is gorgeous, and you can enjoy some peace and quiet alongside low taxes!
And since we have been talking taxes, we do believe you would be interested in reading about what things you can NOT deduct from your taxes!
#2 Tennessee The one thing that is not mentioned is that the towns and state impose a high sales tax on customers. When combined with the town tax and the state tax on goods sold it is close to a 10% sales tax on goods sold.
I lived in Sevierville TN for 4 yrs and it is pretty bad when you have a 10% sales tax on all the groceries you buy.