When relocating from one state to another, it's vital to consider the new taxation rates you'll encounter in your new state of residence. This is particularly important for retirees, since many are on fixed incomes and unanticipated taxes can radically impair one's retirement lifestyle.
Overview of State Taxes in a Chart
The chart below shows which states currently collect state individual income taxes, state sales taxes, state estate taxes, state inheritance taxes, and/or state gift taxes. Note that local governments at the county or city level may collect one even if the state does not.
|State||Individual Income Tax||Sales Tax||Estate Tax||Inheritance Tax||Gift Tax|
|District of Columbia||Yes||Yes||Yes||No||No|
|Minnesota||Yes||Yes||Yes||No||Yes, as of 7/1/13|
State Income Taxes
The following seven states exempt residents from all income tax liability: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Meanwhile, although New Hampshire and Tennessee, don't tax a resident's wages and salary, these states do tax interest, dividends, and other investment income.
If you are relocating to another state, be sure to check out the filing dates for completing state tax returns and paying taxes. Also, some states may offer tax amnesty programs that will waive any late filing fees.
State Sales Taxes
The following five states do not collect a state sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, some of these states find ways to collect taxes, in other forms. For example, 62 localities in Alaska collect local sales taxes, ranging from 1 percent to 7 percent. Delaware collects a gross receipts tax from businesses, which can equal up to 2.07 percent of the total receipts from goods sold and services rendered throughout the state. And finally, New Hampshire collects a tax on patrons of restaurants, hotels, prepared foods, car rentals, tobacco, electricity, telecommunication services, real estate transfers, and alcohol.
State Estate Taxes
Estate taxes, which are based on the overall value of estate, are currently collected in the states of Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Tennessee, Vermont, Washington, and the District of Columbia.
State Inheritance Taxes
Inheritance taxes, which are calculated based on who inherits the estate as opposed to the overall value of the estate, are currently collected in the states of Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Notice that Maryland and New Jersey collect both state estate taxes and inheritance taxes. And in May 2013, Indiana's inheritance tax was retroactively repealed to January 1, 2013.
State Gift Taxes
Until recently, only the state of Connecticut collected gift taxes at the state level: However, in the late spring of 2013, Minnesota enacted a state gift tax that went into effect on July 1, 2013. In May 2012, the Tennessee gift tax was retroactively repealed back to January 1, 2012. Meanwhile, Louisiana's gift tax was repealed on July 1, 2008, and North Carolina's gift tax was repealed on January 1, 2009.
The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.