Image source: Getty Images
Most U.S. states have a state income tax. The exact tax that residents pay varies from state to state. Some states have a flat tax rate for all residents, while others may have graduated tax rates that vary by income level.
It's tax season, so many Americans have income taxes at the top of their mind. In addition to paying federal income taxes, most people in the U.S. pay state income taxes. Because of this, during the tax season, most Americans file federal and state income tax returns.
However, some Americans may not be required to file an individual state tax return -- especially if they live in a state that doesn't tax earned income.
Residents in the following states don't pay state taxes on earned income
If you're considering moving elsewhere, you may be thinking about moving to a state with no state income tax or heading to a state with a more affordable state income tax rate.
Residents in the following states don't pay state income tax on earned income:
- Alaska
- Florida
- Nevada
- South Dakota
- Tennessee
- Texas
- Wyoming
There are two states that don't levy tax on regular earned income. However, residents in the following states may be responsible for other state-imposed taxes:
- New Hampshire requires residents to pay a 5% tax on interest and dividends only. Recent legislation has begun to phase out this tax, and it will be repealed beginning Jan. 1, 2027.
- Washington recently passed legislation that requires individual residents to pay a 7% tax on the sale or exchange of long-term capital assets if the profits exceed $250,000 annually. This law went into effect on Jan. 1, 2022.
Could moving to a state with no earned income tax save you money?
While moving to a state with no state income tax could reduce your income tax liability, your savings may not be that noticeable. Most states without income tax generate revenue in other ways. This may include imposing higher property taxes and sales taxes.
It's also worth noting that some states have a higher cost of living. For example, while Alaska has no state income tax, it's costly to live there.
If you're considering where to live and want to make a choice that will positively impact your personal finances, be sure to consider all living costs -- including rental and housing expenses.
Federal tax returns are due April 18
No matter where you live in the U.S., April is just around the corner. If you have yet to file your federal or state tax return, you'll want to plan to get started soon.
The federal tax turn deadline for 2022 is April 18. If you're responsible for filing a state tax return, be sure to check to see when your state's filing deadline is this year.
Filing your tax return doesn't have to be challenging. Using tax software can make the filing process less stressful. Check out our best tax software list to find the right software for your needs. You can also review our other tax articles for tax-related tips.
Top credit card wipes out interest
If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest for a whopping 18 months!
That's one reason our experts rate this card as a top pick to help get control of your debt. It'll allow you to pay 0% interest on both balance transfers and new purchases during the promotional period, and you'll pay no annual fee.
Read our full review for free and apply in just two minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
