Where to Live to Avoid Most Taxes
About two-thirds of Americans believe they pay too much in taxes , and only about 25% believe they are getting a good return on their money. Add to that the crazy complexity of our tax code and the plethora of ( often crazy ) advice, and it’s easy to see why people go to such lengths to avoid as much tax as possible.
Of course, it can be helpful to reduce the amount of tax you have to pay each year. If you have flexibility and a portable source of income that you can take with you, moving to a tax-advantaged area can be an effective way to achieve this, but it’s not as easy as Googling states that don’t have an income tax and going to Zillow. You need to consider your overall tax burden and then get creative.
Tax burden
A good starting point is what’s called your state’s tax burden —the impact that taxes collectively have on your wallet and ability to pay other bills. The Tax Foundation website has a collection of data maps that can make finding a specific tax situation in a state or locality much easier. This information can help you figure out which states actually have the lowest tax burden when you consider all the taxes you might have to pay while living there.
For example, you might assume that any state with zero income taxes (there are nine – Alaska, New Hampshire, Wyoming, Florida, Tennessee, South Dakota, Nevada, Texas and Washington) would be an excellent choice in terms of overall tax burden. — but when Money Geek analyzed state taxes, they gave New Hampshire a grade of C and ranked it 32nd out of 50 for taxes. This is because New Hampshire also has some of the highest property taxes in the country, negating some of the benefits of having no income tax.
According to MoneyGeek’s report, the top 10 best states in terms of overall tax burden include Alaska, Arizona, Florida, Montana, Nevada, North Dakota, South Dakota, Tennessee, Washington and Wyoming, with each of these states receiving an “A” grade. with the exception of Montana, which received a B. If you think you’ll be happy living in these states, you’ll get the most for your money without taxes.
Find out which countries your state borders are with.
Moving to a state with a low tax burden is a great start, but you can reduce your personal tax burden a little more by choosing the exact location of your home carefully. The real trick is to find states that have no income taxes (and generally good tax burdens) that border states that don’t have a sales tax. If you live in a place where it’s convenient to travel back and forth between two states, you can live in a state with no income tax and shop in the state without a sales tax.
There are currently three areas where this trick will work: If you live in Washington state and shop overseas in Oregon , you get the best of both worlds. And if you live in Wyoming or South Dakota and can come to Montana to shop, you’re again dodging both taxes—though it’s important to note that while Montana doesn’t have a statewide sales tax, some sales taxes may be collected locally . so you’ll need to do a little research to make sure you choose the right place.
Finally, Arizona, Nevada, and Tennessee are states with an A tax burden, no income tax, and some of the lowest property tax rates in the country (all below 0.50% in terms of the effective property tax rate). If living on the border isn’t for you, choosing to live in one of these states will provide you with the next best overall situation.