As we round the corner into a new year, Tax Day is just around the bend. If you’re like us, doing your taxes probably makes you question some life choices. Why does the government take so much? Why does doing taxes feel like solving a Rubik’s cube while blindfolded? And is there a place where taxes hurt a little less?
We can’t help with the first two, but we might have some tips for that last one. Your best options depend on your situation, but here are some ideas to help you figure things out.
Here are Five Fast Facts on the best states from a tax perspective:
- 📈 For High Income Earners - If you’re raking it in, moving to a no-income-tax state could be a win. There are currently nine of them, and most of them top most lists of favorable state tax situations. You need to know what other ways they make up for no income taxes, but this could be a straight up win for you.
- 🏌️ For Your Golden Years - One way to lean into your retirement years is to live in a place where they just skip over some taxes. Different states have different policies on income tax, property tax, inheritance tax, sales tax, and others. Chat with a tax pro to see where your nest egg can stretch the farthest—it might make those bingo nights even better.
- 🤔 It’s Burdensome - Another way to look at it is the overall tax burden in a state.Total tax burden—what percentage of your income goes to taxes–might be bigger than you’d expect. In New York, it’s around 12%. In Alaska? Just 4.9%. No rocket science here—less burden, more dough for pizza night.
- 👀 For Richer Or Poorer - Our tax system is regressive which means the more you make, the more you pay. Given the lopsided nature of deductions and other (legal) loopholes, the lower- and middle-income families actually tend to get hit the hardest by taxes. Another way to decide where you should live is by how each state treats its rich or poor residents. Overall, the best states to live in if you’re rich are Alaska, New Hampshire, and North Dakota; if you’re rich, you’re better off in Alaska (yep, it’s just a great tax situation there for everyone), Montana, or Vermont. It sucks everywhere for middle income earners.
- 💰 For Return On Investment - Another way to look at it is return on investment. Everyone has some skin in the tax game - they either pay taxes into the system, or they use some services provided by tax dollars (or both). So, maybe you’re willing to pay in more if it means you get more out! About 72% of Americans think their tax rate is too high, but residents of New Hampshire, Florida, and North Dakota get the most bang for their tax buck in terms of quality government services. You’ll be shocked to know that California and Hawaii are the worst.
🔥Bottom line: You work hard for your money, and we’re big fans of everyone keeping more of their own money in their own pockets. Sometimes you have to use “the system” to your advantage, so it may be very worth the time to see if a different state might give you a chance to keep as many of those dollars as possible. Maybe you move, maybe you don’t, but at least you’re better informed!
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