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No-Income-Tax States: Hidden Costs Revealed
7 Dec
Summary
- States with no income tax often raise other taxes to compensate.
- Higher property or sales taxes can offset income tax savings.
- Homeowners insurance costs can be significantly higher in some states.
Many Americans, particularly retirees, are drawn to states with no or low income tax, hoping to reduce their cost of living. States like Florida and Texas have seen significant migration from high-tax areas. However, these tax havens often implement higher property taxes, sales taxes, or other fees to make up for the lack of income tax revenue.
For instance, New Hampshire and Texas, despite having no income tax, rank among states with the highest property taxes. Similarly, Tennessee and Nevada charge some of the highest sales taxes nationwide. These alternative taxes can quickly erode any perceived savings from not paying income tax.
Beyond taxes, other costs can surprise newcomers. Florida, while exempting Social Security benefits from state income tax, has some of the nation's highest homeowners' insurance premiums. This highlights the importance of comprehensive research into all expenses, not just income tax, before relocating.
