One of the biggest factors that can impact the amount of taxes you pay is which state you live in.
Income tax, property tax, and sales and excise tax tend to vary significantly from one state to another.
By moving to a tax-friendly state you can reduce your overall tax burden to a significant extent.
Here are five states with the lowest overall tax rates.
If you do not mind the cold weather, Alaska can be a comfortable place to live in and can help you reduce your tax burden considerably.
There is no income tax, capital gains tax, estate tax, or inheritance tax in Alaska. There is no sales tax either.
The state only charges excise tax on certain goods like tobacco, alcohol, and gasoline.
Alaska’s property tax rate is higher compared to many other states. The median tax rate is $1,212 per $100,000 of assessed home value.
Wyoming is by far one of the most tax-friendly states in the country and is a great choice for middle-class families as well as retirees.
The state does not impose any income tax, estate tax, or gift tax on the residents. There is a 4% sales tax at the state level, and it can increase by another 1% or 2% depending on the municipality you live in.
The median property tax rate is $605 per $100,000 of assessed home value.
There is no income tax, capital gains tax, or inheritance tax in Nevada, which is sufficient to reduce your tax burden by a considerable margin.
On top of that, the median property tax rate is $572 per $100,000 of assessed home value, which is among the lowest in the country.
The state earns a significant percentage of its revenue through sales taxes, which is the reason why the average sales tax rate (including state and local state taxes) is close to 8%, which is among the highest in the country.
You don’t have to pay any income tax in Tennessee, for regular earnings as well as income from investments. There is no capital gains tax or estate tax either.
The median property tax rate in the state is a modest $685 per $100,000 of assessed home value. The state’s sales tax rate is 7%, which is high compared to most other states.
However, of all the taxes, sales tax is the easiest to minimize and avoid to a certain extent, which is why Tennessee is considered one of the most tax-friendly states in the country.
No list of tax-friendly states would be complete without mentioning Florida. There is no income tax, capital gains tax, or inheritance tax in Florida.
This is one of the reasons why the state remains one of the most preferred retirement destinations in the country. You can keep what you earn and pass on your hard-earned wealth to your progeny without paying any taxes to the state.
The average sales tax rate (including state as well as local taxes) is 7%. The median property tax rate is $859 per $100,000 of assessed home value.