States Without Income Tax
There are a handful of states without an income tax, and a couple of others that only tax dividends and interest. Of course, these states must still fund government programs, so they raise the money using fees, property taxes, sales taxes, and various other sources of income. Depending on the details of your individual situation, it may be worth considering a move to one of these states to help stretch your retirement dollars.
The details below are based on data from the states and 2018 data from the Tax Foundation. The Tax Foundation data accounts for per-capita local and state taxes.
Assuming your only consideration is money, Alaska takes first place as the clear winner. But, if the remote nature of the state and the harsh winters bother you, look further down the list for other options. Tax Foundation data shows the average local and state tax per capita came in at $7,555, which is 18th lowest among all the states. In addition, senior citizens are given a property tax exemption on $150,000 of property value.
Alaska funds the government using gas and oil royalties. Along with low taxes, full-year Alaskan residents get an annual payment from Alaska’s Permanent Fund that distributes dividends based on these royalties.
This fund has distributed $1,100 annually, on average, over the previous five years. As Alaskan production has dropped, so have the royalties, but that is still a significant amount of money for just living in Alaska. If this average royalty is subtracted from average tax paid, the result is $2,200 per capita, making it the lowest tax bill in the nation.
When you think of a state for retirees, Florida often tops the list. While weather is a significant factor, so too is the fact that Florida repealed the income tax in 1855. Florida generates funds using property taxes and sales tax (6%). The 2017 per-capita average tax paid came in at $3,322, placing Florida in 24th place among the states.
Whole Story at TFX.