If you live—or plan to live—in one of these states… Over here! Americans Could Be Saving More — They Just Don’t Know It … This sounds like a sweet deal at first glance, but Alaska also has one of the highest costs of living in the U.S. Due to its remote location, Alaskans spend a lot more on things like groceries and healthcare. No one likes to pay income taxes. When you file your Form 1040, you’re reporting and paying your federal income taxes. Since personal income isn't taxed, residents get to hold onto more of their paychecks and potentially bolster their savings-- an undeniable perk. As of 2018, the seven states that don't impose an income tax are: Wyoming, Alaska, Texas, Washington, Florida, Nevada and South Dakota. These states are Minnesota, North Dakota and West Virginia. Depending on where you live and/or work, you may also have to report and pay state income taxes by filling out and filing a state-level tax return. There are seven U.S. states with no income tax, while another two states have no income tax on wages but do tax interest and dividends -- an important consideration for retirees. Ohio law requires a flat rate that cannot exceed 1% unless it's approved by voters.   A s the federal tax filing deadline looms closer and closer, many people are starting their federal tax returns.. For most, a state income tax return is due as well. The flat-tax states … At publication, seven states have no personal income income tax at all. Most states have a personal state income tax. The states that do not collect income tax have to pay for services somehow, and each has its own method. Here are 12 states where you don't have to pay tax on any of your 401(k), IRA or pension income (listed alphabetically). Arizona, Colorado, Illinois, Indiana, Michigan, New Mexico, North Dakota, Ohio, Pennsylvania and Utah levy tax on income under 5%. That essentially means they use the opposite of a progressive tax system. Most states have their own version of the W-4 form for income tax withholding at the state level. The taxes help to subsidize the actual cost of letting companies do business in those states. Nine of those states that don't tax retirement plan income simply have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. A small number of states wave at potential newcomers and shout, "Hey! These are Alaska, Florida, Tennessee, Nevada, New Hampshire, South Dakota, Texas, Washington and Wyoming. While most states use a marginal bracketed income tax system similar to the federal income tax, every state has a completely unique income tax code. Other states have made moves to make their tax situation more favorable in 2021 as well, mainly by increasing standard deductions and personal exemptions. States With No Income Taxes Alaska. It’s important to note that states that don’t tax personal income will typically replace any lost revenue with other taxes or by offering fewer services to their residents. These states have no income tax. Which states don’t have income tax? Low personal income tax rates can be misleading; a lack of available tax deductions, for example, can raise the effective rate you pay. What’s more, every resident receives extra money every year from the Alaska Permanent Fund Corporation. State and Local Sales Taxes We don't have a state income tax!" Ohio local income tax rates range from 0.40% in Indian Hill to 2.5% in Parma Heights. They do apply a flat income tax rate to interest and dividend income. But this isn't the case in the nine states that have flat tax rates as of 2020. The Most and Least Tax-Friendly States for Retirees. Both Tennessee and New Hampshire do not charge any tax on income, except dividend and interest income earned through investments. Two others don't tax wage income. 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