Tax Planning – Where You Live Will Have a Major Impact on Taxes You Pay

 What state you live in will determine how much taxes you will pay. When you consider federal and state income tax you also have to add sales, property and intangible taxes to that total tax picture. Some states also impose inheritance tax upon estates or their beneficiaries.

 Seven states impose no state income tax, those being Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Additionally, New Hampshire and Tennessee limit their state income taxes to only dividends and interest income.

 When it comes to state sales taxes the following states impose no sales tax Alaska, Delaware, Montana, New Hampshire and Oregon. However these sates may impose other revenue raising techniques that may impact you such as high property taxes, etc.

 You may enjoy lower taxes if you move to another state, but you should be aware of rules that could cause you tax problems.

 Generally income is taxed where it is earned by both an individual and a business. Therefore if you live in a tax free state but work in a taxable state you will pay state income tax. If some cases there is a tax reciprocity agreement which means that the states that permit out of state workers to file returns and pay only in their state of residence.

 Residency requirements can present problems, while must states consider you a resident if you are present in the state for more than six months they will also consider you a resident if you conduct demonstrate intent to consider it your domicile.

 Then there are the situations of living in multiple states, multiple state employers, owning business in one state and living in another. All makes for an interesting annual hassle at tax time.

 If you are hiring a tax professional to prepare you federal and state taxes be careful to chose one that’s familiar with each state that you need to file with, as each states tax laws can be quite different.

 Daniel Iuculano