Lisa Mailhot | June 26, 2024
Buyers
Many Americans, in an effort to save more of their earnings, consider moving to states without an income tax. While the lack of state income tax can seem like a major financial break, this advantage may be offset by other rising costs in these regions.
Data from Realtor.com® highlights that, over the past five years, home prices in states like Wyoming, New Hampshire, South Dakota, and Tennessee have increased significantly, surpassing the national average. This surge in housing costs is a key factor diminishing the savings from no income tax.
Apart from home prices, residents in states such as Texas and Florida face steep insurance premiums due to climate-related risks. Additionally, these states often compensate for the lack of income tax with higher sales and property taxes, which can unexpectedly burden residents.
While saving on state income tax, residents might find themselves paying more through other channels. High demand for housing in these states drives up property values and, consequently, property taxes. Furthermore, states need to fund essential services, which often leads to increased sales taxes, impacting overall affordability.
When comparing tax burdens across the nation, states with no income tax often show higher costs in other areas:
If you're considering a move to a no-income-tax state for financial benefits, it's crucial to look beyond the apparent savings. Higher living costs in other areas might offset the benefits of no state income tax. For those looking to make a move and want a comprehensive understanding of the financial landscape, let's connect to ensure you're making the best decision for your future.
Reference: U.S. States With No Income Tax Aren’t as Affordable as You Might Think, Janet Siroto.
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