State Income Tax: Know the differences between the states!

With the advance of technology, fax machines and the internet many Americans are more mobile than ever before. They can operate their money making businesses from the beach or the mountains or anywhere in between.

One thing they all have in common is the constant search to lower their tax burden. One important component of the total tax burden is the payment to state income taxes. So if you are considering moving, taxes and state income taxes should be something for you to consider. Surprisingly, there are seven states that levy no state income tax.

Paying federal taxes is the biggest burden but coming up fast are the growing state income taxes.

If you are considering relocating to a new state, your overall tax liability should be something for you to consider. Specifically, there are a number of states with no income tax. Of course, depending on your earnings, living in a state with no income taxes can potentially save you hundreds if not thousands of dollars every year at tax time.

The seven states with no state income tax are: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

If you are thinking of moving four states with no income taxes have ocean beaches, although Alaska is not well known for their beach resorts. When it comes to mountains, Alaska has plenty although a bit of a long winter season, Washington and Wyoming both have beautiful mountain areas. Nevada has some striking mountain areas near Lake Tahoe. South Dakota can claim some "black hills," and some sand bars along the Missouri River but no beaches or mountains.

Two other states do technically collect income tax, but for all practical purposes, they could be added to the no income tax group. Both Tennessee and New Hampshire do not collect a tax on your earnings, but they do collect state taxes if you receive dividends. Under state tax law, dividends are technically considered to be income so neither Tennessee nor New Hampshire are states with no income tax.

At first look, a lack of state income tax may seem like a great benefit. Generally, this is true, but you need to do your homework. Many of the no income tax states make up the difference by collecting taxes in other ways. Each state is somewhat different; some have high relative state sales taxes or higher property taxes.

The exceptions are Alaska and Nevada. Alaska collects most of its taxes from oil royalties and taxes on the oil companies. Nevada generates most of its revenues from the gaming business.

If you are considering moving to another state, the overall area tax burden is something you should carefully take into consideration. State income taxes are only one part of the tax cost picture. With careful research, you'll have an accurate tax picture when comparing states.