The offers mentioned below reflect the 2022 tax season.
Nine U.S. states do not impose income tax on personal income. Living in a state with no income tax means that less money comes out of your paycheck each month, and come tax season you only have to submit a federal return.
As for the rest of the country, thirty-two states (plus D.C.) charge a progressive income tax where higher earners pay a greater percentage of their income than lower earners do, and another nine states charge a flat income tax where everyone is taxed at the same rate regardless of their income level.
Below, Select breaks down what taxpayers should be mindful of before relocating to one of these tax-friendly locations. And as tax season is upon us, we also share our recommendations on the best online tax software for filing your state (if applicable) and federal returns.
States with no state income tax
In the nine states with no income tax (listed below), all residents avoid paying tax on their earnings. We include New Hampshire in this list as it has no tax on earned wages, but note that it does charge a flat income tax on investment earnings.
Currently, the states with no individual income tax include:
- Alaska
- Florida
- Nevada
- New Hampshire (doesn't tax earned wages, but does tax investment earnings)
- South Dakota
- Tennessee (as of this year, will no longer tax investment earnings)
- Texas
- Washington
- Wyoming
An analysis of 2020 moving data by United Van Lines found that the Covid-19 pandemic accelerated decisions to move from high-tax states like New Jersey, New York and California to no-income-tax states like South Dakota, Tennessee and Florida (which ranked in the top 10 states with the most people moving in).
What to consider before moving to a no-income tax state
While moving to a state with no income tax may sound appealing, it comes with trade offs.States with no income tax often make up for the loss of revenue to the state by charging residents a higher sales, property or excise tax (taxes on goods like fuel, tobacco and alcohol).
For instance, Tennessee has the highest combined sales tax rate in the nation at 9.53%, according to the Tax Foundation, a D.C.-based think tank. Washington state has one of the highest tax rates on gasoline in the nation, at 49.4 cents per gallon. Of all states, New Hampshire and Alaska rely the most on property taxes, with tax collections accounting for 67.6% and 51.8%, respectively, of their revenue.
Taxes are also a big source of income that the state uses to finance public services such as infrastructure, healthcare and education. Lower taxpayer dollars likely translates into lower funding for these initiatives.
South Dakota, for example, spends the lowest on education of all states in the Midwest, at $10,073 per pupil per year. Nationwide, the average school spending per pupil is $12,612, and Florida, Nevada, Tennessee, Texas all spend less than the average.
To weigh another state's affordability, consider these above factors as well as the overall cost of living and job opportunities in your field. Leaving a big city, for example, you may have to accept certain trade-offs, such as a lower paying job for more affordable real estate.
And even if you live in a no-income-tax state, you'll likely still owe federal income taxes if your total income is more than the standard deduction. This is based on your age and filing status, but you can use a federal income tax calculator like this one from SmartAsset to determine just how much you can expect to pay.
Tax deadlines, and what to know about online tax software
Tax season is well underway as the IRS started accepting and processing tax returns on Jan. 24 for the 2022 tax season.
Taxes are traditionally due on April 15, but because April 15 falls on a holiday for Washington D.C., tax day this year is April 18, 2022. While most state deadlines are the same day, a few states have bumped their deadline back a few extra weeks. You can check your state's filing deadline here.
The federal tax deadline is not far away meaning it's time to start collecting your 2021 tax documents. And rather than mail your taxes to the IRS, you may consider signing up for an online tax service like H&R Block or TurboTax to ensure your taxes are securely filed.
It's important to select the right tax platform based on your tax needs as each of them are designed for specific tax returns ranging from simple tax returns to complex returns.
Here are our favorite tax platforms:
- Best overall tax software:TurboTax
- Runner-up:H&R Block
- Best free tax software:Cash App Tax (formerly Credit Karma Tax)
- Best affordable tax software:TaxSlayer
- Best for accuracy guarantee:TaxAct
TurboTax
On TurboTax's secure site
Cost
Costs may vary depending on the plan selected - see breakdown by plan in the description below
Free version
For simple tax returns only. Not all taxpayers qualify. See if you qualify.
Mobile app
Yes
Live support
Yes, costs extra
Terms apply, see below for our methodology.
Pros
- Step-by-step guidance with a Q&A format that is easy to follow
- TurboTax Live provides on-demand advice and a final review from a tax expert
- Live Full Service has a tax expert prepare, sign, and file your return
- Accuracy and maximum refund guaranteed*
- Audit support, which provides free assistance if you get an IRS or other tax notice
Cons
- More costly than other software programs
- Live expert assistance plans have additional costs
Cost breakdown by plan:
- Free (For simple tax returns only. Not all taxpayers qualify. See if you qualify): $0 federal, $0 per state
- Deluxe (helps you maximize credits and deductions): $39* federal, $39* per state
- Premier (includes returns with investments and expenses): $69* federal, $39* per state
- Self-employed (for personal and business income and expenses): $89* federal, $39* per state
- Live Basic (includes help from tax experts): for a limited time, $0* federal, state included - simple tax returns only; must file by 3/31
- Live Deluxe (includes help from tax experts): $89* federal, $49* per state
- Live Premier (includes help from tax experts): $139* federal, $49* per state
- Live self-employed (includes help from tax experts): $169* federal, $49* per state
- Full Service Live Basic (includes help from tax experts; simple tax returns only): $169* federal, $39* state
- Full Service Live Deluxe (includes help from tax experts): $219* federal, $49* per state
- Full Service Live Premier (includes help from tax experts): $329* federal, $49* per state
- Full Service Live self-employed (includes help from tax experts): $359* federal, $49* per state
*Click here for TurboTax offer details and disclosures
**A simple tax return is Form 1040 only.
Cash App Taxes (formerly Credit Karma Tax)
On Cash App's secure site
Cost
$0 federal and state
Free version
Yes
Mobile app
Yes
Tax expert support
No
Terms apply, see below for our methodology.
Pros
- Completely free to use
- Get access to Cash App Tax services like credit monitoring alerts and credit score updates
- Audit defense, which gives you support from a representative if the IRS audits your tax return
- Maximum refund guarantee, or Cash App will pay you the difference up to $100 ($25 minimum)
- 100% accuracy, or Cash App will reimburse you for any penalties up to $1,000
Cons
- Only available in 40 states and D.C.You can't file with Cash App Taxes (formerly Credit Karma Tax) if you lived in a state for only part of the tax year, earned income in more than one state during the tax year or earned income in a state you didn't live in
- No support from tax professionals
H&R Block
On H&R Block's secure site
Cost
Costs may vary depending on the plan selected - see breakdown by plan in the description below
Free version
Yes (for simple returns only)
Mobile app
Yes
Live support
Yes, costs extra
Terms apply, see below for our methodology.
Pros
- Simple step-by-step guidance that's easy to follow
- Unlimited on-demand chat or video support with Online Assist plans
- Ability to speak to a tax expert who has an average of 10 years experience (costs extra)
- Over 11,000 physical locations so you can meet with a tax expert in-person
- Maximum refund guarantee, or H&R Block will refund the plan fees you paid
- Audit support guarantee, which provides free assistance if you get an IRS or other tax notice
- 100% accuracy, or H&R Block will reimburse you for any penalties or interest up to $10,000
Cons
- Plans that include speaking with a live tax expert start at $69.99 for federal, plus additional state fee
- One of the more costly software programs
Cost breakdown by plan:
- Free (for simple returns): $0 federal, $0 per state
- Deluxe (helps you maximize credits and deductions): $28 federal, $37 per state
- Premium (includes returns with investments and expenses): $44 federal, $37 per state
- Self-employed (for personal and business income and expenses): $68 federal, $37 per state
File with a tax pro:
- Virtual (includes help from tax experts): Starting at $85
- In office (includes help from tax experts): Starting at $85
- Drop off (includes help from tax experts): Starting at $85
Bottom line
Avoiding income taxes by living in one of the listed states can be a great way to keep more of your hard-earned money. However, it's important to know moving states won't instantly make you rich and that you might pay higher taxes for other things.
But as you prepare to file your taxes this year, be sure to consider where you'd like to allocate your tax refund. Whether its filling your emergency fund or investing in a Roth IRA, your tax refund can be a great financial jump forward.
Read more
Free vs. paid tax services: When to plan on paying for an upgrade
Here’s what a simple tax return is and how to qualify so you can file your taxes for free
5 common ways to lower your taxable income in 2022
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
What are the 9 states that don't tax income? ›
As of 2022, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.
What does it mean to live in a state with no income tax? ›Elizabeth Gravier. The offers mentioned below reflect the 2022 tax season. Nine U.S. states do not impose income tax on personal income. Living in a state with no income tax means that less money comes out of your paycheck each month, and come tax season you only have to submit a federal return.
Is there anywhere you can live without paying taxes? ›Key Takeaways. Bermuda, Monaco, the Bahamas, and the United Arab Emirates (UAE) are four countries that do not have personal income taxes.
How do states with no income tax pay for things? ›States without an income tax often make up for the lack of these revenues by raising various other taxes, including property taxes, sales taxes, and fuel taxes. These can add up so that you're paying more in overall taxation than you might have in a state that does tax your income at a reasonable rate.
What states have no tax on Social Security? ›- Alaska.
- Florida.
- Nevada.
- New Hampshire.
- South Dakota.
- Tennessee.
- Texas.
- Washington.
Florida primarily makes up for its lack of an income tax with its sales tax, which generates around 80% of the state's revenue. Florida's sales tax is imposed on services and goods, and both the state and county levy a certain percentage.
What are the 13 states that don t tax pensions or social security? ›- Alaska.
- Florida.
- Georgia.
- Illinois.
- Iowa.
- Mississippi.
- Nevada.
- New Hampshire.
Those eight – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming – don't tax wages, salaries, dividends, interest or any sort of income. No state income tax means these states also don't tax Social Security retirement benefits, pension payments and distributions from retirement accounts.
Can the IRS take the home you live in? ›Technically, as it happens, the IRS is allowed under the law to take a taxpayer's home to satisfy tax debts. However, it is relatively difficult for the IRS to do so. As a result, the IRS tends to be quite restrictive in seeking to take residences to pay tax debts.
What is the most income without paying taxes? ›Depending on your age, filing status, and dependents, for the 2022 tax year, the gross income threshold for filing taxes is between $12,550 and $28,500. If you have self-employment income, you're required to report your income and file taxes if you make $400 or more.
How long can I live in the US without paying taxes? ›
How Many Days Can You Be in the U.S. Without Paying Taxes? The IRS considers you a U.S. resident if you were physically present in the U.S. on at least 31 days of the current year and 183 days during a three-year period. The three-year period consists of the current year and the prior two years.
At what age do you stop paying property taxes in Florida? ›There is an additional $50,000 homestead exemption (FLORIDA STATUTE 196.075) for person 65 and older. The adjusted gross income requirement for 2023 cannot exceed $35,167 for all members of the household.
Who doesn't pay income tax? ›For example, in 2022, you don't need to file a tax return if all of the following are true for you: Under age 65. Single. Don't have any special circumstances that require you to file (like self-employment income)
What state is best financially to retire in? ›| Rank | State | Sharecare Well-Being Index |
|---|---|---|
| 1 | Ohio | 56 |
| 2 | Iowa | 56 |
| 3 | Minnesota | 62 |
| 4 | Florida | 59 |
Overall Cost-of-Living Index: 89
Iowa tops the list for best states to live on just a Social Security check thanks to a number of factors.
Nine states don't tax retirement plan income because they have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Illinois, Mississippi and Pennsylvania don't tax distributions from 401(k) plans, IRAs, or pensions.
What state is the most rich in taxes? ›| Overall Rank* | State | Total Tax Burden (%) |
|---|---|---|
| 1 | New York | 12.75% |
| 2 | Hawaii | 12.70% |
| 3 | Maine | 11.42% |
| 4 | Vermont | 11.13% |
Of all the states, California has the highest individual income tax rates. Rates range from 1% to 13.30%, based on income. Hawaii also has a high individual income tax rate, ranging from 1.4% to 11%, and spread across 12 different income brackets. New Jersey follows with 1.4% to 10.75%.
Why do some seniors not file taxes? ›If the only income you receive is your Social Security benefits, then you typically don't have to file a federal income tax return.
Can the IRS take your home in Florida? ›Homestead: a federal tax lien becomes a lien on a Florida homestead. The IRS will not foreclose the lien and force the sale of the taxpayer's home, but the tax lien must be paid like any other mortgage lien if the taxpayer sells or refinances the house.
Does Florida have property tax on cars? ›
In lieu of an ad valorem tax, the state levies an annual vehicle license tax based upon the vehicle's net weight. Personal property less than or equal to $25,000 is exempt.
Are property taxes high in Florida? ›Property Tax
These rates are assessed at the local level and can vary by county, and they are based on the value of the property. Property taxes in Florida are some of the highest in the country, although there are several exemptions to try to lighten the load on some Floridians.
The IRS has wide discretion to exercise its levy authority. IRC § 6331(a) provides that the IRS generally may “levy upon all property and rights to property,” which includes retirement savings.
Where is the cheapest warm place to retire? ›More often than not, retirees will find the most affordable and sunniest retirement destinations in the southernmost state of the continental U.S. — Florida. In fact, one third of the 15 U.S. cities on this list are in Florida.
Do seniors pay taxes on Social Security income? ›Some of you have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return).
What states to avoid when retiring? ›- California.
- New Mexico.
- Illinois.
- New York.
- Washington.
- Alaska.
- Louisiana.
- Oregon.
Invest in Roth accounts
Distributions from Roth 401(k) and Roth IRA accounts are not taxable in retirement. You can take as much money out of these accounts as you would like without owing taxes, provided you follow IRS withdrawal rules.
Who is eligible for Social Security bonus? For every year that you delay claiming past full retirement age, your monthly benefits will get an 8% “bonus.” That amounts to a whopping 24% if you wait to file until age 70.
What assets Cannot be seized by IRS? ›There are only a few types of assets that cannot be seized. The IRS cannot seize real property, and your car cannot be seized if used to get to and from work. You also cannot seize the money you need for basic living expenses. However, all of your other assets are fair game for seizure.
Will the IRS make you sell your house? ›The IRS cannot sell your house without first getting a court judgment approving the sale. Court approval is required by law – Internal Revenue Code 6334(e) requires a U.S. District Court judge to approve an IRS sale of a personal residence before it can be sold.
Does IRS go after senior citizens? ›
Although it is rarely done, the IRS can garnish 15 percent of a senior's Social Security for past-due income taxes. However, this garnishment will never happen without the senior being first notified. The IRS will almost never garnish pensions and other retirement income.
How much can a 70 year old earn without paying taxes? ›For retirees 65 and older, here's when you can stop filing taxes: Single retirees who earn less than $14,250. Married retirees filing jointly, who earn less than $26,450 if one spouse is 65 or older or who earn less than $27,800 if both spouses are age 65 or older.
Does Social Security count as income? ›You must pay taxes on up to 85% of your Social Security benefits if you file a: Federal tax return as an “individual” and your “combined income” exceeds $25,000. Joint return, and you and your spouse have “combined income” of more than $32,000.
Do poor people pay the most taxes? ›According to the Institute on Taxation and Economic Policy, state and local tax rates are highest for the poor and lowest for the rich.
Can you be a resident of two states? ›Legally, you can have multiple residences in multiple states, but only one domicile. You must be physically in the same state as your domicile most of the year, and able to prove the domicile is your principal residence, “true home” or “place you return to.”
Which city is tax free in USA? ›Manchester, New Hampshire
Manchester is one of the very few cities with absolutely no sales or income tax. Additionally, New Hampshire residents enjoy the benefit of no state income tax on wages. Families earning $150,000 pay about 9.1% of their income on average in Manchester.
If you are a US citizen and you decide to renounce your US citizenship this can still have substantial tax implications to you. The US imposes an 'Exit Tax' when you renounce your citizenship if you meet certain criteria. Generally, if you have a net worth in excess of $2 million the exit tax will apply to you.
Do property taxes go down when you turn 65 in Florida? ›Certain property tax benefits are available to persons 65 or older in Florida. Eligibility for property tax exemptions depends on certain requirements. Information is available from the property appraiser's office in the county where the applicant owns a homestead or other property.
What age is senior citizen in Florida? ›The Florida Senate
(1) As used in this section: (a) “Senior citizen” means a person who is 60 years of age or older.
Exemption for longtime limited-income seniors: If you are 65 years old or older, and have had a permanent Florida residence for at least 25 years, you might be entitled to a 100% exemption. Your eligibility for this exemption depends on the county or city where you live, and your income must be below a specified limit.
Can anyone avoid paying taxes? ›
There are certain situations where you receive money and will not have to pay taxes. These include some disability insurance payments, health savings accounts (HSAs), employer-provided insurance, life insurance payouts, financial gifts, and inheritances.
Why do so many Americans not pay income tax? ›“For the most part, people don't pay income tax because they have little income,” he said. Gleckman added that virtually all Americans pay some form of tax, whether it's sales and excise taxes, state taxes or property taxes. The big question for 2023 and the number of non-payers is the economy.
How does the government know if you don't pay taxes? ›In order to convict you of a tax crime, the IRS does not have to prove the exact amount you owe. But such charges most often come after the agency conducts an audit of your income and financial situation. Sometimes they're filed after a tax collector detects evasion or fraud.
What is the least tax-friendly state? ›4 out of 5 of the most tax-friendly states saw population growth at or above the national average (Wyoming, Nevada, Florida and Tennessee). Illinois and Connecticut received a grade of E for being the least tax-friendly states in the nation.
What state has no sales or income tax? ›Alaska. Known as 'The Last Frontier', Alaska is the most tax-friendly state in the country. It has no sales tax and no state income tax.
What is the best state to retire 2023? ›Other popular retirement states
For example, WalletHub ranked Virginia as the best state to retire in its 2023 study, followed by Florida, Colorado, Wyoming, and Delaware. Why Virginia? WalletHub's methodology evaluated quality of life, affordability, and health care using 47 metrics.
| Rank | State | Annual Property Tax |
|---|---|---|
| 1 | Hawaii | $606 |
| 2 | Alabama | $895 |
| 3 | Colorado | $1,113 |
| 4 | Louisiana | $1,187 |
(a) Alaska, Delaware, Montana, New Hampshire, and Oregon do not levy taxes on groceries, candy, or soda. (b) Three states levy mandatory, statewide, local add-on sales taxes: California (1%), Utah (1.25%), and Virginia (1%).
How does Florida make money without income tax? ›Sales and Excise Taxes
Florida primarily makes up for its lack of an income tax with its sales tax, which generates around 80% of the state's revenue. Florida's sales tax is imposed on services and goods, and both the state and county levy a certain percentage.