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What To Know Before Moving to States With No Taxes

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Mar. 28 2022, Published 6:49 a.m. ET

Paying taxes isn’t fun to anyone, but evading taxes is risky. You could damage your credit score, face expensive penalties, or even go to prison. The good news is that there are ways to reduce your taxes legally. One is moving to a state with no taxes.

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For some time, people thought they could hide behind Bitcoin to escape taxes but then found out that the IRS can trace transactions to identify tax cheats. (Despite its best efforts to crack down on tax cheats, the IRS admits that tax evasion costs the country as much as $1 trillion per year.) You can still reduce your income tax, property tax, and sales tax, though, by moving to a certain state.

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States with no taxes on personal income

Nine states don’t tax residents’ paychecks: Alaska, Texas, Florida, Nevada, Tennessee, New Hampshire, Washington, Wyoming, and South Dakota. (In New Hampshire, however, there's a tax on dividends earned on stocks or other investments.) Even in states with income tax, social security benefits are often exempt from the levy.

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Are there states without property tax?

Property tax is charged on real estate. In emerging neighborhoods, there may be a special type of property tax, MUD tax. It helps fund important public services such as schools, police and fire departments, and road maintenance.

If you buy a house with a mortgage, the tax is often included in the monthly bill, but you're responsible for paying the tax directly once you pay off your mortgage. Unfortunately, all states have property tax.

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Property taxes are lower in some states, however. Hawaii, Alabama, and Louisiana. South Carolina, West Virginia, and Wyoming have real-estate tax rates that are easier on your wallet.

States with no sales tax

Sales tax is levied at the point of the final sale, making purchases more expensive: if a product is priced at $10 and is subject to a 5 percent sales tax, you would have to pay $10.50 to get it. It’s an important source of revenue that keeps state programs running.

The good news is that some states don’t levy sales tax: Alaska, New Hampshire, Oregon, Delaware, and Montana. (Though in some cases, local authorities in these states may impose it.)

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