Are there states where you can live and you do not have to pay income tax?
Yes, there are seven American states that do not require residents to pay any income tax. In addition, to the states with no income tax there are two states that only tax dividends [1] and interest income.
States with No Income Tax
Which states don’t have an income tax? They are:
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
States With Limited Income Tax
The two states that tax only dividend and interest income are:
- Tennessee
- New Hampshire
Why don’t these states have to collect an income tax?
These states have another way to fund state operations. Generally, these states may have a higher property or sales tax [2]. They also may have higher taxes for fuel, alcohol, cigarettes, or other products and services. Or they can have a unique circumstance such as Alaska that has the sale of petroleum or Nevada that has gaming tax collections to fund the state.