If you live or work in one of these seven states you may not have to file a return.
In most states, you have to file a state income tax return AND a federal income tax return.
But in seven states you don’t have to file a state return because they don’t have an income tax:
- South Dakota
Plus there are another two states that only tax income from dividends and interest:
- New Hampshire
Does no tax mean more income?
Living in one of these states will certainly save you from the hassle of having to file an extra return during tax season, but it won’t necessarily save you any money. These states make up for the gap left in their budgets by the absence of income tax through relatively higher property, sales, and fuel taxes.
Normally, you have to file a resident tax return in the state where you are a resident, as well as a nonresident tax return in any additional state where you earned money during the tax year.
Your resident return will tax you on all of your income, regardless of where it was earned and your nonresident return will tax you only on the income you earned in that state.
So if you are a resident of a state without an income tax, you will still need to file a return in any other state where you earned money. Conversely, if you are a resident of a state with an income tax, but you work in one of the seven without one, you will not have to file a nonresident return there.
Remember, you can easily take care of all your state income tax returns at the same time you file your federal. Do it right here on PriorTax.
From a different point of view…
Just as an interesting point of comparison, here are the ten states with the highest income taxes per capital:
- New York
- New Jersey
Photo via A McLin on Flickr.