Retired IRS
Mr. Smith, an independent truck driver, lives in Brunswick, Ga. In 2009 he earned $62,000 after business expenses as an owner-operator.
Mr. Smith works on the road for months at a time and spends fewer than six weeks a year in his home state. In Georgia the maximum income tax rate is 6 percent on income over $7,000. Therefore Mr. Smith must pay $2,933 in Georgia state income taxes based on the standard deduction for Georgia and filing single.
Because Mr. Smith spends so little time in Georgia it would be wise for him to consider moving 60 miles down the road to Florida where there is no state income tax. By moving to Florida, Mr. Smith would save $2,933 in Georgia state income taxes.
Considering the various rates of state income taxes across the country and the amount of time that many truckers spend away from their home state, moving to a state that does not impose state income taxes could save a driver a lot of money.
Here are the states that do not impose an income tax on individuals.
• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming
New Hampshire and Tennessee do not impose a state income tax on wages and business profits. However, New Hampshire does impose a flat 5 percent tax on dividend and interest income over $2,400 for individuals and $4,800 for married couples filing a joint tax return.
Tennessee also does not tax wages and business income but it does impose a 6 percent tax on dividends and interest income on more than $1,250 for individuals ($2,500 for married couples filing jointly).
On the negative side Hawaii, California, Rhode Island, Vermont, Oregon, Iowa, New York, New Jersey, Maine and Minnesota have the highest state income tax rates in the nation. The tax rates for these states range from 7 to 11 percent and because of budget shortfalls many states are considering raising their tax rates even higher.
If you live in one of these states that has a high income tax rate then moving to a state with a lower rate or no income tax at all could save you significant money.
So make sure you consider state income tax rates if you are planning to relocate. That’s what our friend Mr. Smith did this past January when he packed his bags and moved down the road to Jacksonville, Fla., where he will no longer pay state income taxes.