Don’t worry about filing a past state tax return if you belong to one of these as your resident state.
The U.S. states that do not have income taxes are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. However, just because you don’t need to pay income tax, doesn’t mean a state is any cheaper to live in. In order to maintain state revenue, states with no income tax rely on other uses of taxes such as estate, property, sales, excise, gift taxes and more.
For example, here are a few ways each state maintains their state revenue:
- Alaska depends on estate, excise, gift and severance taxes
- Florida depends on property, sales, and corporate income taxes
- Nevada; being a tourist attraction, depends on fees, gambling taxes, and high sales taxes
- South Dakota taxes property, alcoholic beverages and cigarettes
- Texas depends on high use, sales and property taxes
- Washington depends on business, occupation and sales taxes
- Wyoming depends on taxing property and businesses
Unlike the seven states above, New Hampshire and Tennessee do not have personal income taxes but still taxes specific types of income. New Hampshire doesn’t have sales tax, or inheritance tax but it does tax interest and dividends. Tennessee does not have estate and inheritance tax but taxes dividends and interest due to its Hall Tax.