If you’re willing to relocate, you can save quite a bit of money on taxes. By shopping around from state to state, you can save significant amounts on your bill for business or personal taxes. According to Entrepreneur, individuals can save 10% to 30% simply by moving. States and municipalities set widely different tax rates on personal income, gas, property and sales. Your business could enjoy major savings in a different state.
But don’t pack those boxes yet: determining which state is complicated as the states that have business-friendly tax policies are not always the most tax-friendly for individuals and vice versa. To help you decide if there is a move in your future, here is a closer look at which states are “tax-friendliest”.
The Top Tax-Friendliest States for Individuals
Tax rates in a number of states are easy on the personal budget. Florida ranks high as a tax friendly state for individuals because it charges no personal income tax. Property is taxed at just 3.45%, well below the national average. Add that to the fact that it’s warm all year round, and it makes for an attractive destination for a move.
If life in the Southwest suits your fancy, you can do well on the personal tax side. Nevada also has no income tax and the rate on property is just 3%. New Mexico does charge income tax at 1.70% to 4.9%, but property is taxed at just 1.93%. Utah is a bit higher at a 5% income tax rate, but property rates are set at 2.75%.
In the West, Wyoming has no income tax and the rate on gas is a mere $0.14 a gallon. The sales tax is 4%. Washington State has no income tax, and property is taxed at 2.91%, but the state levies a 6.5% sales tax to help fund its annual budget. If you love beautiful scenery and hate paying taxes, consider Alaska. There is no personal income tax there either, nor any sales tax. Property tax is just 4.55%.
According to USA Today, three states—Wyoming, South Dakota and Nevada—are especially friendly for businesses. All three have no corporate income tax or gross receipts tax, as well as no personal income tax.
Each of the three states has set up a solid tax base that doesn’t rely on personal and general business taxes. Wyoming charges taxes on the extraction of oil, coal, gas and minerals for its tax base, which produces close to $1 billion each year for the state. South Dakota has a strong economy built on two foundations. Its had a policy of actively attracting credit card companies to set up business in the state since the 1980s. In addition, Ellsworth Air Force Base is a major employer. Nevada, of course, has its casinos, which provide 5% of its tax needs. The state also has taxes on drilling for gas and oil.
What Makes a State Tax-Friendly?
According to the study done each year by the Tax Foundation, there are a number of factors that impact how tax-friendly a state is. Even if a state has no corporate tax, it may have a gross receipts tax, which can actually increase what a company has to pay at tax time. Then too, within each state some counties are more tax-friendly than others, complicating the decision of where to move.
The fact that a state does not have a personal income tax or a sales tax helps businesses as well as individuals. That’s why Alaska is number four on the list of the top 10 business tax-friendly states as well as being one of the tax-friendliest for individuals. The fact that Alaska has a high corporate tax is balanced by the absence of a sales tax or personal income tax.
Florida, with no personal income tax, is number five on the list, even though it is ranked #14 for its corporate tax. Montana is sixth because it has no sales tax, which offsets the fact that its corporate tax rate earns it its spot at #18 on the list of business tax-friendly states. Rounding out the top 10 are New Hampshire, Indiana, Utah and Texas.
If you’re paying more than you think you should at tax time, perhaps a move to another part of the country should be considered. You and your business could save a bundle when the taxman comes around next year by simply relocating to a different, tax-friendlier state.