Tax Friendly States – Five Golden Rules to Finding a Cheap Place to Live

01
September

Individuals seeking an inexpensive place to live should consider both the tax laws and the cost of living in the state. Income tax, state sales tax, fuel tax, cigarette tax and retirement income tax all become a factor in a family’s total expenses for the year. Some states do not charge sales tax on prescription drugs, food, and clothing purchases. Additionally, the cost of homes and food also play a role in how well a salary can accommodate a family. The taxes of several states will be explored to help readers determine where to live.

1) Sales Taxes

States with No Sales Taxes:

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

Some states possess only a base rate and allow counties to add additions to the base rate as needed. These states are called single rate states. States with single rates include the following:

• Connecticut
• Hawaii
• Indiana
• Kentucky
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• New Jersey
• Rhode Island
• Vermont
• Virginia
• West Virginia

States with the Highest Sales Tax

California – 8.75%
Indiana – 7%
Mississippi – 7%
New Jersey – 7%
Rhode Island – 7%
Tennessee – 7%
Minnesota – 6.875%
Nevada – 6.85%
Washington – 6.5%
Texas – 6.25%
Illinois – 6.25%

2) State Income Taxes

Currently, only seven states waive taxes on personal income. The seven states are listed below:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

Tennessee and New Hampshire only apply income taxes to interest and dividends. The remaining 41 states impose income taxes on personal income. Thirty-five of the 41 states base their taxes on federal returns. These states only take a portion of what is paid to the federal IRS and request taxes based upon this amount.

3) Cigarette Tax

States are allowed to determine how much taxes they charge on their tobacco products. Some states charge remarkably more taxes than others. Some of the cigarette taxes are listed below:

• New York City: $4.25
• Rhode Island: $3.46
• Connecticut: $3.00
• New Jersey: $2.70
• Hawaii: $2.60
• Wisconsin: $2.52
• Massachusetts: $2.51
• Vermont: $2.24
• Washington: $2.025
• Alaska: $2.00
• Arizona: $2.00
• Connecticut: $2.00
• District of Columbia: $2.00
• Maine: $2.00
• Maryland: $2.00
• Michigan: $2.00

Currently, the majority of the cost of cigarettes is taxes. In fact, 82 percent of the cost of cigarettes is taxes.

4) Retirement Income Taxes

Some states exclude Social Security retirement benefits from taxation. The following states are excluded from paying income taxes:

• Alabama
• Arizona
• Arkansas
• California
• Delaware
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Mississippi
• New Jersey
• New York
• North Carolina
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• South Carolina
• Virginia
• Wisconsin

By law, citizens are required to pay taxes on their Social Security benefits. Social Security benefits are subject to personal income tax unless the state allows tax exemptions for benefits.

5) Counties with the Lowest Real Estate Taxes

De Soto Parish: $129
Evangeline Parish: $127
Jefferson Davis Parish: $127
Webster Parish: $125
Sabine Parish: $124
Richland Parish: $122
Avoyelles Parish: $120
Vernon Parish: $120
Allen Parish: $119
Franklin Parish: $117

In order to rank states according to their tax friendliness, one Forbes study created rated the states according to region. The states were rated based upon, Federal Bureau of Investigations crime rate, unemployment rate, average salary, cultural opportunity, and the Bureau of Labor Statistics.

Some of the cheapest places to live in the United States based on the aforementioned criteria are listed below:

• Spokane, Washington
• Modesto, California
• Ogden-Clearfield, Utah
• Fort Collins-Loveland, Colorado
• Greeley, Colorado
• Minneapolis, Minnesota
• Omaha, Nebraska
• St. Louis, Missouri
• Oklahoma City, Oklahoma
• Tulsa, Oklahoma
• Ann Arbor, Michigan
• Knoxville, Tennessee
• Chattanooga, Tennessee
• Louisville, Kentucky
• Albany, New York
• Pittsburg, Pennsylvania
• Harrisburg, Pennsylvania
• Charlotte, North Carolina
• Gastonia, South Carolina
• Atlanta, Georgia
• Worchester, Massachusetts
• Springfield, Massachusetts

Summary

Prior to finding a cheap place to live, individuals should review the list above. This will allow individuals to find a home state that best accommodates your financial needs.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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