A significant majority of the American population—approximately two-thirds—feels that they are overpaying on taxes, with only about one in four claiming they receive satisfactory value for their contributions. When factoring in the frustrating intricacies of the tax code and the excessive amount of dubious advice available online, it’s understandable that many seek ways to minimize their tax liabilities.

Reducing annual tax obligations can be advantageous. If you possess a flexible income source that allows you to relocate, finding a tax-friendly state can significantly lower your tax liabilities. However, the process is far more complex than a simple web search for states with zero income tax. It requires a comprehensive evaluation of the total tax burden while brainstorming creative solutions.

Understanding Overall Tax Burden

An effective starting point is to examine a state’s overall tax burden—which reflects the cumulative impact of various taxes on an individual’s financial situation. The Tax Foundation provides a valuable collection of data maps to easily explore the tax landscape across different states and municipalities. Utilizing this information aids in discovering states that truly offer a favorable tax environment when factoring in all applicable taxes.

For instance, it might seem logical that states with zero income tax (such as Florida, Texas, and Wyoming, among others) would present the best options for low taxation. However, when Money Geek’s analysis was conducted, New Hampshire received an average grade along with a ranking of 32nd out of 50 states due to its exceptionally high property taxes, which negate some benefits of its lack of an income tax.

According to findings from MoneyGeek, the top ten states that boast the best overall tax burdens include Alaska, Arizona, Florida, Montana, Nevada, North Dakota, South Dakota, Tennessee, Washington, and Wyoming. Most of these states earned an A grade, with Montana receiving a B. Residents in these states can capitalize on their situation to maximize their tax savings.

Consider Neighboring States

Shifting to a state with a lower tax burden is a productive first step, but there’s potential for additional savings by carefully selecting your specific location. The key strategy involves discovering states that feature no income tax while bordering those with no sales tax. Residing near the border facilitates easy travel between states, allowing residents to enjoy the benefits of a no-income-tax state along with shopping in a no-sales-tax state.

Currently, there are three advantageous scenarios where this method can be employed: Living in Washington and shopping in Oregon provides an excellent balance. Similarly, residents of Wyoming or South Dakota can shop in Montana—although it is essential to note that while Montana has no statewide sales tax, local sales taxes may apply, so thorough research is necessary.

Furthermore, states like Arizona, Nevada, and Tennessee not only provide an A rating for tax burden but also feature some of the lowest property tax rates in the nation, all below 0.50% effective tax rate. For those who prefer not to live on state borders, choosing to settle in these states offers an advantageous alternative for managing overall tax expenses.