These 9 States Have No Income Tax. But Ask Yourself These 4 Questions Before You Consider Relocating

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It can be tempting to move somewhere with no state income tax. But learn why you’ll need to proceed with caution. 

There are different types of taxes you might have to pay on your income. No matter where you live, you’ll be liable for federal taxes. And you’ll also need to pay into Social Security and Medicare.

But you may be able to avoid one type of tax — state income taxes. Nine states do not impose a state income tax. The list consists of:

AlaskaFloridaNevadaSouth DakotaTexasWashingtonWyomingNew HampshireTennessee

However, you should be aware that New Hampshire and Tennessee impose taxes on interest income from savings or dividend income from investments. Your paycheck from work, however, won’t be taxed at the state level.

You may be tempted to move to a state with no income taxes so you can pay the IRS less on your earnings. But before you start planning a move, ask yourself these important questions.

1. Will I be able to find work in a new state?

There are certain jobs that might make it possible to work from just about anywhere. But if your industry is concentrated in your current state, then moving to a different one could mean struggling to find a job. So before you move, talk to local recruiters and see what the job market looks like not in general, but based on your specific line of work.

2. Will my income decline if I move to a new state?

Maybe you’ll have no problem finding a job in a new state based on what you do. Or maybe you’re allowed to work remotely, so you can do your job from any corner of the country. Before you plan your move, make sure you’re not looking at a major decrease in earnings, because that could negate the tax savings you’re hoping to reap.

Some companies, for example, allow workers to do their jobs remotely but adjust salaries based on local living costs. So if you’re a remote worker living in New York earning $100,000 a year, you may not end up getting paid that same $100,000 if you relocate to Wyoming.

3. Will higher housing costs wipe out my tax-related savings?

Housing is a lot of people’s largest monthly expense. Before you plan to move for tax savings, research housing prices and property taxes to estimate your costs.

Also, keep in mind that right now, mortgages are expensive to sign. So even if you’re able to swap your home for a new less-expensive one in another state, your monthly payments might be higher due to today’s mortgage rates.

4. How do I feel about the climate?

Some of the states on this list are known for being notably hot or cold. Florida and Texas certainly fall into the former category, while Alaska, South Dakota, Wyoming, and New Hampshire clearly fall into the latter. If you’re used to living in a place with a moderate climate, going to either extreme could be a shock you’re not prepared for. So make sure that change is one you’re willing to deal with.

You may find that moving to a state with no income tax results in a lot of savings for you. But before you start officially planning that move, tackle these essential points thoroughly.

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