is almost always mandatory — and almost always stressful. Thankfully, we’ve been given more time to file our taxes this year. The IRS pushed back the due to the , and every state quickly followed suit. But some of us are faring even a bit better than others when it comes to state tax returns. For some people, once you handle your federal file, you’re completely done. For others, you’re only halfway there.
There are seven states with no income tax:
- South Dakota
Along with that, Tennessee and New Hampshire don’t tax earned income. But since they tax investment income and dividends, you still might be required to file a return.
The rest of us — whether single filers or joint filers — have to pay some level of state income tax, whether it’s a flat rate or based on your taxable income.
But even though some states don’t have a state income tax, they’re not completely tax friendly, and there are other ways they can get a little more money out of you. For instance, you might live in a state that doesn’t have a state income tax but does have a high sales tax or property tax rate.
Sales tax is a tax the government puts on the sale of goods and services. It’s enforced at the state, city and local municipality levels.
Sales tax rate varies by state and then again at the local level. There are 45 states and the District of Columbia that collect state sales tax. In addition to state-level sales taxes, another 38 states also enforce local sales taxes. In some instances, local taxes can be more than the state tax.
The five states that don’t collect sales tax include:
- New Hampshire
The states with the highest combined sales tax between state and local sales taxes are:
- Tennessee — 9.47%
- Louisiana — 9.45%
- Arkansas — 9.43%
- Washington — 9.17%
- Alabama — 9.14%
While the state of Alaska doesn’t collect sales tax, local taxes average 1.43% in sales tax throughout the state. It’s the state with the lowest overall sales tax.
California has the highest state-enforced sales tax at 7.25%.
Keep in mind that there are some exemptions for sales tax. Many states exempt groceries from sales tax, while some tax it at a lower rate compared with other goods.
Every year, many states offer a sales tax holiday. Some states like Alabama, Texas and Florida offer separate holidays: one for hurricane supplies and one for school supplies. Mississippi has one just for firearms and hunting supplies. For most states that offer a tax holiday, it’s usually geared toward school supplies for the upcoming school year.
All 50 states and the District of Columbia have some sort of property tax to boost the state’s economy. It can come at the state, county and local level, like by municipality or school district.
Property taxes are one of the main sources of local revenue. According to the Tax Policy Center, school districts collected $181 billion in 2012 from local property taxes.
New Hampshire doesn’t collect state income tax but does have property taxes. In 2016, it was nearly half the general revenue for the state and local governments combined. It’s one of a handful of Northeastern states that put a lot of emphasis on property tax. Five of those states had property taxes account for 30% of overall revenue:
- New Jersey
- Rhode Island
Alabama relies the least on property taxes: 10%. But remember that even though Alabama doesn’t have a state income tax and doesn’t rely on property tax as much as other states, it still has one of the highest combined sales taxes — between state and locally enforced — in the country.
Do you need to file a state tax return?
Unless you’re in one of the states with no income tax, you’re on the hook for filing a federal and state return. Everyone is required to file a federal return regardless, and how much you pay will depend on your personal income and tax brackets. Some free filing systems let you file a state return for free, while others charge for the extra filing.
If you’ve recently moved or worked in a different state from where you live, you might need to file more than one state tax return. But it depends on the states you lived and worked in. If both states collect state income tax, you’ll need to file multiple returns. If one or more of them didn’t, you don’t need to worry about the extra paperwork.
There is some good news to come out of a state income tax filing. Once you file, you might get a tax refund, just like with a federal income tax return. While the amount varies, you may still qualify to get a little extra cash.
When you file, continue to file the easiest way possible: electronically. And make sure you select direct deposit to receive your money as soon as you can.
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