The IRS isn't the only one who wants a piece of your paycheck - 41 states have a broad-based individual income tax. Only seven states lack an income tax altogether. They are:
- South Dakota
Two states have a limited income tax on individuals. These states tax only dividend and interest income:
- New Hampshire
Will I Pay Less Taxes Overall in These States?
Not necessarily. States need revenue to function, and these states will have to make up for the lack of income tax somehow. New Hampshire and Texas, for example, make up for it in property taxes. Both states have some of the highest property taxes in the nation. The cost of higher property taxes, sales taxes, fuel taxes, and other taxes could amount to higher overall taxes in some of these states.
That being said, most (but not all) of these states did make the Tax Foundation's top ten list of states with the lowest overall tax burdens.