NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
When you decide to move from one state to another, one factor that should be taken into consideration is what type of taxes you will be charged in your new state of residence. This will be particularly important for retirees since many are on fixed incomes and unanticipated taxes can wreak havoc on their retirement lifestyle.
There are currently seven states that exempt all income earned by their residents from taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
While two states, New Hampshire and Tennessee, do not tax their residents' salaries or wages, they do collect taxes on interest and dividends.
There are currently five states that do not collect a state sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon.
Although Alaska does not collect a state sales tax, 62 localities collect a local sales tax which ranges from 1% to 7%.
Although Delaware does not collect a state sales tax, it does collect a gross receipts tax from businesses which can equal up to 2.07% of the total receipts from goods sold and services rendered in the state.
Although New Hampshire does not collect a state sales tax, it does collect a tax on patrons of restaurants and hotels, prepared food, car rentals, tobacco, electricity, telecommunication services, real estate transfers and alcohol.
Estate taxes, which are calculated based on the overall value of an estate as opposed to who inherits the estate, are currently collected in the following states: Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Tennessee, Vermont and Washington.
The state estate tax exemptions range from a low of $675,000 in New Jersey to a high of $5,340,000 in Delaware and Hawaii. For a chart showing the current state estate tax exemptions, refer to the State Estate Tax and Exemption Chart. For a chart showing the 2014 state estate tax exemptions and top tax rates, refer to 2014 State Death Tax Exemption and Top Tax Rate Chart.
It is important to note that as of January 1, 2014, federal estate tax laws were scheduled to revert to the laws that were in effect in 2001. Nonetheless, Congress and President Obama acted early in 2013 to fix this problem and so the state pick up tax, which would have allowed states like California and Florida to collect a state estate tax, was not reinstated.
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 following states: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. (That's right, Maryland and New Jersey collect both state estate taxes and inheritance taxes.) In May 2013, Indiana's inheritance tax was repealed retroactively to January 1, 2013.
For a chart showing which beneficiaries are subject to inheritance taxes in the states that currently collect them, refer to the State Inheritance Tax Chart.
Until recently, only one state collected gift taxes at the state level: Connecticut. 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.
Louisiana's gift tax was repealed on July 1, 2008, and North Carolina's gift tax was repealed on January 1, 2009.
Overview of State Taxes
Below is a chart that shows which states currently collect state individual income taxes, state sales taxes, state estate taxes, state inheritance taxes, and/or state gift taxes.
NOTE: This chart shows which state governments collect these types of taxes; while some state governments may not collect a certain type of tax, local governments at the county or city level may collect one even if the state does not.
* Only tax interest and dividends, not salaries and wages
State Tax Chart
|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|