American Tax Havens

Tax season is safely behind us, so it’s time to breathe a sigh of relief. But if you paid more to the IRS than you feel you should have, maybe it’s also time to start thinking about doing things a little differently. Maybe it’s time to think about living in a state where the tax burden is less than it is where you are now.

Some states have low property taxes, low gasoline taxes and low sales taxes. Some have low income tax rates, and some expect not one cent of income tax revenue from its residents. Each of these states is the closest thing there is to an American tax haven, and there are many factors to consider for anyone thinking about relocating to one.

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Using data from tax service provider H&R Block, CNBC.com lists the top 10 states for low tax burdens. We also spoke to financial experts for insight into things you should think about before you sell your house, pack your bags and drive into the sunset.

1. Wyoming

Wyoming is the best place for overall tax rates in the country. It has low taxes across the board, including one of the lowest gasoline taxes in America, at 14 cents per gallon. It also has low property taxes and sales tax, and levies no personal or corporate income tax.

Jerry Lynch, president and certified financial planner at JFL Consulting, urges caution before heading to the Cowboy State in a fit of low-tax-rate fever. “If you get up and move to a state you’re not familiar with, the move could cost you 10 percent of the value of your home,” he said in an interview.

“So if you’re moving to another state, rent before you buy and make sure you want to live there. What you save in taxes is miniscule compared to the cost of selling your home twice.”

2. Alabama

The property tax on owner-occupied housing in Alabama is .41 percent, second-lowest in the country. However, anyone wishing to start a business in Alabama should be aware of its corporate tax rate.

“Alabama imposes a flat corporate tax of 6.5 percent on all corporate income,” says Kaplan. “That means would-be entrepreneurs and small businesses in the ‘ramp up phase’ would be better off moving elsewhere.”

Alabama has a low gasoline tax, but there’s a catch. “Alabama's municipalities have the right to levy their own ‘local option’ taxes on gasoline,” says Kaplan. “Tread carefully if you settle in a town that adds the local option of imposing an additional gasoline tax.”

3. Colorado

Colorado has low tax rates across the board. It levies a relatively low 4.63 percent flat tax on the personal income of its residents and has a low sales tax rate of 2.9 percent.

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“Most small businesses are S Corporation or sole proprietorships,” says Kaplan. “They pay taxes for their business at the tax rate of individuals. That means Colorado is an appealing place to run a small business.”



4. Louisiana


Louisiana’s property tax on owner-occupied housing is .43 percent, third-lowest rate in the country.

Louisiana also has a low sales tax rate of 4 percent, which is made up of 3.97 percent state sales tax and 0.03 percent Louisiana Tourism Promotion District sales tax.







5. Tennessee


Tennessee levies a 6 percent tax on income from dividends and interest. However, the state leaves the salaries and wages of its taxpayers untouched.

On the downside, the state sales tax is 7 percent, one of the nation’s higher rates, and the state has the fifth-lowest median household income in the country, at $41,461.

Click here to read the full list of American Tax Havens.

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