The 9 Tax-Free States: Understanding Why These States Don’t Collect Income Taxes

By: Dan Cooper

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The United States in Full Tax Season

The United States has officially entered the tax season since January 13 when the Internal Revenue Service (IRS) started receiving and processing tax returns for the fiscal year 2022. More than 168 million Americans are expected to file their returns and pay their respective taxes during this season.

Nine States in the American Union Do Not Pay Income Tax

According to the Tax Foundation, there are eight states in the American Union that do not tax personal income of residents. Another state does not tax personal gains but does levy investment income and dividends. These nine states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, and New Hampshire.

Why are These States Not Taxed?

Income taxes are set at the state level and not the federal one, so each state has the right to levy or not levy income taxes. Most states’ decision is tied to fiscal policy ideals, while others use it as an incentive to attract new residents.

As the United States enters full tax season, taxpayers should be mindful of their respective states’ income tax policies. Despite this, millions of Americans are expected to file their taxes and pay them on time.

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