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| Saving for retirement is important, but saving money in retirement is important, too. One possible way to save money is to move to a state with no income tax. For retirees, that can mean no state tax on Social Security benefits, pensions and other sources of retirement income.
Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming — have no income taxes. New Hampshire, however, taxes interest and dividends, according to the Tax Foundation. It has passed legislation to begin phasing out that tax starting in 2024 and ending in 2027.
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Other state taxes fill the revenue void
States have various ways to raise revenue, and those without state income taxes find different means to pay for roads, schools and other infrastructure. One typical source is sales taxes. Florida, for example, levies a 6 percent sales tax, and the average locality tacks on 1.08 percent, according to the Tax Foundation, for a combined average of 7.08 percent. Tennessee, at 9.55 percent, has the highest combined sales tax of any state in the U.S. Washington state levies a tax of 49.4 cents per gallon on gasoline, one of the highest rates in the nation.
Alaska has no statewide sales tax, although some localities have one. New Hampshire has no sales taxes at all.
Other states use property taxes as a revenue stream. How much you pay in property taxes depends on the state tax rate and the value of your home. Homes tend to cost more in urban areas, so people living in cities tend to have the highest property tax bills. The six counties with the highest median property tax payments — half higher, half lower — all have bills exceeding $10,000 and all are near New York City: Bergen, Essex and Union counties in New Jersey, and Nassau, Rockland and Westchester counties in New York. These counties all have high median home values.