Tax-Free States Are Creating Wealth Like Never Before!

So if you're considering a move as part of your quest to conquer taxes, there's actually nine states in the US that have no income tax. But remember, these no income tax states, they often make up this lost revenue through things like sales tax or property taxes. Your tax burden is a combination of things. Let's say you're a resident of Vermont earning $250,000 a year. A move from that state to, say, your neighboring state New Hampshire could save you $115,000 a year.

Welcome back to another edition of We're Talking Money. I'm your host, Phil Clark, and today we're talking about a subject that frankly I don't think gets enough emphasis. This topic just might shape where you call home. It's state income tax. We all dream of living in those picturesque locales, but things like state income tax can have a tremendous effect on your net worth.

So picture this. You're contemplating a move and you're weighing the pros and cons of many different states. Maybe you're drawn to, say, the sunny shores of Florida. Perhaps you like something a little more robust, like Texas, for example. These low tax states, they're not just attractive because of their weather.

States like Florida and Texas saw significant increases in population during 2023. Florida grew by 365,000 people, and Texas, they came in at 473,000 new residents, all in 2023. Contrast that to higher tax states like New York. They lost 102,000 residents. And California, they lost 75,000 residents.

But exactly what does this have to do with your wallet? Let's say you're a resident of Vermont earning $250,000 a year. A move from that state to, say, your neighboring state New Hampshire, which is a no income tax state, could save you $115,000 a year without considering any other tax benefits. Now, if you invested that $155,000 savings in just 10 years, assuming an 85% interest rate, you're talking about a new nest egg of almost a quarter of a million dollar.

But it's not just those earning the higher levels of income that benefit. Even a single person making $100,000 per year, they could benefit in a huge way by moving from, say, Oregon to somewhere like Florida or Texas. On the flip side, be careful when you consider a move from a low tax state to a high tax state. If you already live in a low tax or no tax state like Nevada, just moving to somewhere like Utah could cost you thousands of dollars every year.

Now, you're probably wondering which states are the lowest income tax states. There's actually nine states in the US that have no income tax. Those states include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. But remember, these no income tax states, they often make up this lost revenue through things like sales tax or property taxes.

And it's not just about the state income tax. Your tax burden is a combination of things, and that makes it even more important to consider both state and federal taxation before you make a final decision about moving. You can see by the chart, Oregon, for example, has the highest effective tax rates for single and married filers. California, surprisingly, ranks among the best states for married couples. If you're single, however, California is probably not the best choice.

So if you're considering a move as part of your quest to conquer taxes, places like Florida, Texas and even North Dakota might be worth considering. North Dakota ranks number one both single filers and married filing jointly.

Now let's focus on single filers for a moment. Ohio, Arizona, Pennsylvania, Indiana, Louisiana, Rhode Island, New Jersey, Arkansas and Michigan round out our lowest effective tax rates. And keep in mind, this is considering federal tax as well. For married filing jointly, you might consider Ohio, New Jersey, California, Arizona, Louisiana, Pennsylvania, Indiana, Vermont and Rhode Island. All of these make up great places to help you control your tax situation.

Well, that's all for this episode, and I hope it's inspired you to consider how geography can affect your tax bill and ultimately your long-term wealth plan. Everyone's tax situation varies. That's why we recommend that you always consult a financial professional before you make these really big decisions. There's lots to consider.

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