Easiest Way to Save on Your Taxes in the USA - Move to a State with No Income Tax

Every year in the United States, taxpayers pay over $3 trillion in taxes. That’s a lot of money! Americans pay not only federal income tax, but also state income tax. This means a massive chunk of your income goes to the government.

Such high taxes can be particularly painful when you are carrying a lot of debt, such as credit card debt or student loan debt. Nobody likes to lose such hard earned money. So what can you do to make sure that you pay less in the way of taxes next time?

Move to a state with no income tax. As simple as that.

 You can save up to $1,977 a year by moving to a state with no income tax as per a  study by Student Loan Hero.

Let’s understand how this works.

States that collect income tax use them for funding basic services and essential programs for residents. Over 50% of state tax revenues are invested in education and healthcare initiatives like Medicaid. A number of state agencies use the income taxes to pay for law enforcement and public transport.

In most states in the country, residents have to pay both federal and state income taxes. However there are 9 states within America that don’t levy a state income tax. These states are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. As long as you live in these states, you don’t have to pay state taxes, and so can get massive yearly savings.

How much could you save on taxes by living in these nine states? That depends largely on your income bracket and current location. So, if you are from the state of Oregon for example, you will have a state income tax of 7.75%.

This is the highest rate of taxation in the country. This means someone who makes the median salary in the state — which is about $49,710 — will need to pay $3,851 extra, in addition to the federal taxes paid by them.

So if you move to a state without state income tax, you can avoid having to pay an amount close to $4,000 a year in taxes. This is a significant amount indeed, no matter how you look at it. You can then use your tax savings to pay off student loan obligations or credit card debt.

The more you save from not paying state income tax, the easier it will be for you to get out of debt, so that you will be able to save more in the long run. Use this money to pay off your loans and lower the interest charges. You can as well save tens of thousands over the lifetime of your loan.

 Now, there are costs related to moving to another state that could lower your savings somewhat, such as putting a deposit on a new house or apartment, or getting a new vehicle registration. These factors should be taken into account.

  

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