Social Security In The Midwest
Out in the Midwest, only seven of 12 states are free of Social Security taxes. South Dakota doesn’t have an income tax. Meanwhile, Illinois, Indiana, Iowa, Michigan, Ohio, and Wisconsin have full state income tax protection for those receiving Social Security benefits.
On the other hand, Kansas, Minnesota, Missouri, Nebraska, and North Dakota tax Social Security in varying degrees. Minnesota and North Dakota are notable for following the federal rules on taxation.
Income $72000 And Below:
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States That Have Either No Income Or Sales Taxes
Fed up with taxes?There are a handful of states around the country that don’t have any state income or sales taxes, so you earn your income or spend it without having to give to the state.7 U.S. states don’t have income taxes, while 2 others have nearly no income tax, and 5 don’t have any sales taxes , with 2 states having both nearly no income and sales taxes.Local governments do make up the revenue gap in other ways, however, either through property taxes , or lesser services, and some local jurisdictions do impose their own sales tax on shoppers in their communities.As for New York State, the state sales tax rate is 4%, but many locations have additional sales tax on top of the state tax. New York also has one the highest income tax rates in the nation.But here are some places across the country you can work and shop without giving any extra to the state:
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States Without A Sales Tax
Only five states don’t impose a sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. But this list is a little misleading because Alaska does allow localities to impose sales taxes, and these average 1.76%. It’s not a huge amount, but it’s not zero, either.
Delaware doesn’t have a sales tax, but it does impose a gross receipts tax on businesses.
Delaware’s gross receipts tax is a percentage of total receipts from goods sold and services rendered within the state, and it ranges from 0.0945% to 0.7468% as of 2020. It’s not technically charged to consumers, but its effect can nonetheless be felt in the sales prices of goods and services.
More Pressure On The Poor
While the jurys still out on the benefits of living in a state with no income tax, experts agree that there is one clear result for those states that do levy an income tax.
It helps the poor.
An income tax is a classic tool for redistributing wealth. Its usually progressive in nature, meaning that it taxes higher earners at a greater rate than lower earners. Other taxes typically dont have that Robin Hood-like characteristic.Sales taxes, for example, are considered regressive. They dont change depending on the income level of the consumer. They treat everyone the same. So do levies on food, gasoline and other key consumable items.
These taxes place an unfair burden on the poor, according to research from the Institute on Taxation and Economic Policy. The reason is the lowest earners in the state devote the lions share of their take-home pay to buying things that are subject to sales taxes. The wealthy, who can save a chunk of their income in their 401s and other investments, have a much smaller proportional exposure to the sales tax.
Its extremely difficult to fund government adequately and sustainably when families with the largest incomes are contributing the least, says Carl Davis, research director at the Institute on Taxation and Economic Policy in a statement.
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Every State Taxes Services In Its Own Way
This guide is designed to provide an overview of the complexity of sales tax on services by state.
Five U.S. states do not impose any general, statewide sales tax, whether on goods or services. Of the 45 states remaining, four tax services by default, with exceptions only for services specifically exempted in the law.
This leaves 41 states and the District of Columbia where services are not taxed by default, but services enumerated by the state may be taxed. Every one of these states taxes a different set of services, making it difficult for service businesses to understand which states laws require them to file a return, aswell as which specific elements of their services are taxable.
States With The Highest And Lowest Property Taxes
Property tax falls under local, not state, jurisdiction. Median household property tax payments from analysis performed by the Tax Foundation as a percentage of median household income from the Census Bureau’s 2018 American Community Survey cites these as the counties with the most expensive property tax:
- Essex County, New Jersey 16.86%
- Passaic County, New Jersey 14.62%
- Union County, New Jersey 12.70%
These Louisiana parishes hold the least expensive spots for property tax as a percent of income:
- Assumption Parish 0%
- Vernon Parish 0.45%
- Grant Parish 0.68%
Louisiana carries some of the lowest property tax rates as a percentage of earned income because it offers a homestead exemption. This law allows the first $7,500 of assessed property values to forego having property taxes levied against them.
For reference, assessed home values represent 1/10 of the home’s actual value. For example, a $100,000 home would have a $10,000 assessed value. Therefore, Louisiana’s homestead exemption allows the first $75,000 of home value not to count toward calculating your property tax bill, which goes a long way toward lowering the percentage of income that goes toward these taxes.
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You Will Be Able To Buy Apple Products Tax Free In Select Us States From Later This Month
Apple is passing on sales tax holiday benefits for customers in select US states. Customers residing in these states can buy select Apple product without having to pay the sales tax.
Each year select states offer sales tax holidays as an incentive for consumers and businesses. The sales tax holiday is aimed at helping reduce costs for families during school shopping season. Typically June-July is the time when people in the US shop for school supplies. The date and duration of the sales tax holiday depend on individual states. Purchases made during these days will be exempt from sales tax.
Each state has its policy to be eligible for sales tax holidays. For instance, the sales tax holiday in Alabama is from July 16th-18. It includes clothing, computers, school supplies and books, with each one having its upper limit. Under the scheme, the total value of all eligible items should not exceed $750. Apple devices, including Mac, iPad, and iPod touch, are eligible for sales tax holiday. Furthermore, accessories like a keyboard, mouse and Apple Pencil are also eligible.
Sales tax holiday in Missouri lies between August 6-8. The upper limit for computers is listed at $1500. Meanwhile, the sales tax rate in Missouri is 4.225%. In other words, you can save as much as $60 on a $1500 Mac or iPad. South Carolina seems to offer a better deal with no limits sales tax holiday.
You Dont Own Property
New Hampshire and Wyoming have fairly high property taxes. In 2020 for instance, New Hampshire collected approximately $3,307 per person in property taxes, according to the Tax Foundation.
But if you dont own much property, then you wont be affected by high property taxes. The state will get revenue from property owners, but it wont collect any from your salary.
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Paychecks And Retirement Benefits Are Safe From State Taxes If You Live Here
by John Waggoner, AARP, Updated April 8, 2021
En español | 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.
The 5 States Without Sales Tax
Sales tax is a large revenue driver for 45 states and the District of Columbia. According to the Tax Foundation, the average taxpayer will pay just over $1,000 per year in sales tax. In the 2020 fiscal year, income from state retail sales taxes totaled $340 billion. This makes up roughly a third of all state tax revenue, second only to income tax. Sales taxes are a key way to fund government initiatives.
While the states below do not charge sales tax, in some cases, counties and cities within these states can charge their own taxes.
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State Tax Levels In The United States
|This article is part of a series on|
State tax levels indicate both the tax burden and the services a state can afford to provide residents.
States use a different combination of sales, income, excise taxes, and user fees. Some are levied directly from residents and others are levied indirectly. This table includes the per capita tax collected at the state level.
This table does not necessarily reflect the actual tax burdens borne directly by individual persons or businesses in a state. For example, the direct state tax burden on individuals in Alaska is far lower than the table would indicate. The state has no direct personal income tax and does not collect a sales tax at the state level, although it allows local governments to collect their own sales taxes. Alaska collects most of its revenue from corporate taxes on the oil and gas industry.
This table does not take into consideration the taxing and spending of local governments within states, which can vary widely, and sometimes disproportionately with state tax burdens.
What Is Irs Free File
The IRS Free File Program is a public-private partnership between the IRS and many tax preparation and filing software industry leaders who provide their brand-name products for free. It provides two ways for taxpayers to prepare and file their federal income tax online for free:
- Traditional IRS Free File provides free online tax preparation and filing options on IRS partner sites. Our partners are online tax preparation companies that develop and deliver this service at no cost to qualifying taxpayers. Please note, only taxpayers whose adjusted gross income is $72,000 or less qualify for any IRS Free File partner offers.
- Free File Fillable Forms are electronic federal tax forms you can fill out and file online for free. If you choose this option, you should know how to prepare your own tax return. Please note, it is the only IRS Free File option available for taxpayers whose income is greater than $72,000.
Find what you need to get started, your protections and security, available forms and more about IRS Free File below.
The IRS does not endorse any individual partner company.
- A copy of last year’s tax return in order to access your Adjusted Gross Income
- Valid Social Security numbers for yourself, your spouse, and any dependent, if applicable
Income and Receipts
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States With No Income Tax
The table below illustrates the differences among states with no income tax. The first two columns show the state’s overall tax burden as a percent of personal income followed by the rank that the state holds among all 50 states.
The third column shows the state’s affordability ranking, which combines both the cost of housing and cost of living, and the last column includes the state’s rank on the U.S. News& World Report “Best States to Live In” list.
These figures are as of the most recent reports: 2020 for overall tax burden, 2018 for affordability, and 2019 for “Best States to Live In.”
|Comparison of States With No Income Tax|
Property Taxes And Senior Property Tax Relief Programs
Homeownership is a good way for seniors to lock in their housing costs for the long run so that they dont have to worry about shifts in the housing or rental market. In some states, however, high property taxes or property taxes that can grow rapidly from one year to the next serve to discourage retirees from owning a home. Property tax rates and rules are drastically different between states.
For example, New Jersey homeowners typically spend around $8,400 annually in property taxes. In Alabama, most homeowners spend much less, at right around $600 a year.
One way many states help retirees limit the burden of property taxes is by offering exemptions or circuit breakers. The terminology varies by state, but exemptions typically allow seniors to protect part of their homes value from property taxes. They often have income limits, so households earning more than a certain amount are not eligible.
Circuit breakers can have the same effect as an exemption. Sometimes, they also limit the amount property taxes can increase from one year to the next for seniors.
Property tax deferrals are another helpful form of property tax relief for seniors. Deferrals allow seniors and retirees to put off payment of some or all of their property taxes until a later time. It is typical for deferred property tax payments to be subtracted from the revenue of an eventual home sale, meaning they never come out of a seniors income.
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How To File Your Federal Tax Return For Free
In the past, I have gone to the IRS free file webpage, because they have links to a bunch of tax preparers that offer free tax return filing . Some of them offer a state return to be filed for free as well, but most dont.
If you are interested in this option, you will have to use the links on the IRS page in order to get the free efile deal they are offering. Many of the tax preparation websites listed will not offer you the free efile if you go directly to their website.
Sales Tax Takers And Leavers
If you’re a consumer, you’ll want to consider that all but four states Oregon, New Hampshire, Montana and Delaware rely on sales tax for revenue. Alaska only levies a paltry 1.76% sales tax rate.
Of these, Alaska also has no income tax, thanks to the severance tax it levies on oil and natural gas production. 37 states, including sales-tax-free Alaska and Montana, allow local municipalities to impose a sales tax, which can add up. Lake Providence, Louisiana has the dubious distinction of most expensive sales tax city in the country in 2020, with a combined state and city rate of 11.45%.
Factoring the combination of state and average local sales tax, the top five highest total sales tax states as ranked by the Tax Foundation for 2020 are:
- Tennessee 9.55%
Residents of these states pay the least in sales taxes overall:
- Alaska 1.76%
- New Hampshire 0%
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Why Do Some States Not Have An Income Tax
State income tax is set at the state level, not the federal level, so it’s entirely up to state lawmakers. Their reasons for not having income taxes could be driven by their ideals for tax policy, as an incentive to attract new residents, or due to an increase in revenue from another source.
The state income tax was repealed after an oil boom in the 1970s in Alaska. The overwhelming majority of Alaska’s revenue comes from oil industry activity in the state. Alaska decided that it could receive most of the revenue it needed from the oil industry, so the state no longer needed to tax residents’ incomes.
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.
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Other states use property taxes as a revenue stream. In 2018 , New Hampshire got nearly 64 percent of its revenue from property taxes the highest rate of any state. In fact, three of the top five states that relied the most on property taxes have no income taxes. Alaska is second, and Texas is fourth.
Alaska also gets a big chunk of income from oil and its not the only state without an income tax to do so. Wyoming, too, collects significant revenue from so-called severance taxes, which are levies imposed on the extraction of natural resources.
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