Local taxes

Hypno

Crow
Does anyone know how local taxes work? I live and work in a state with 6% state income taxes. The tax base is pretty much one's federal tax base.

Neighboring states like Florida and Tennessee have no state income tax.

My job pays well, I don't want to change jobs. But I'm working remotely, so I could just as easily move to Florida or Tennessee.

I guess that would work for investment income, but is job-income deemed earned where your employer is located?
 

paninaro

Kingfisher
It depends on the state you are in. Many states have reciprocity agreements with neighboring states if a lot of people commonly live in one state and work in another, for example NY and NJ. Even if they don't the tax rate is typically based on where you live, though without reciprocity you may still need to file in your office/employer's state to get a refund of any taxes that state withheld from you.

Keep in mind a state with no income tax doesn't necessarily mean a lower tax burden. They have to fund services somehow. Usually in states with no income tax, they will have a higher sales tax or real property tax compared to states that have an income tax. They may also assess other taxes like a personal property tax on the value of your car.

You mentioned Tennessee -- they have the highest state sales tax in the country, at 9.53 percent.
 

bucky

Ostrich
Also, watch out for fees. A buddy of mine lives in Colorado. A few years back they passed a referendum on tax increases and new taxes, or something to that effect. Within a few years it became clear that the county and state governments had just started calling those "fees" instead.
 

Hypno

Crow
I get it, but I live in Georgia where the income tax is 6%. Big tax on cars. Sales tax is 6-8% in the cities. Property taxes are about 1-1.5%. I don't spend that much, and will save thousands with a lower income tax.
 
Tennessee has a high sales tax, but it is a long skinny state and you are never more than a couple of hours or so from from another city of decent size in an adjacent state if you have big ticket items to buy. And you can load up and make a run to Sams Club or whatever once a month. Real estate tax in Tennessee was the lowest of any state I ever lived in, and other fees like car registrations were low as well. Car registrations are a flat fee, not a percentage of book value. City taxes were less than $50 for a year (for a wheel tax sticker on one's license plate) in the places I lived there, and only if you lived in the city limits. Overall, I think it is the best tax state I ever lived in. Better than Texas, to compare it to another state without an income tax. Have thought about moving back that way in 5 - 10 years.

Also, Tennessee has the lowest per-capita unfunded public pension liability in the country, so there should be no temptation to try to soak the tax payer to make up for past over-promising for public sector votes.

Tennessee has three distinct areas and even within those areas there are big differences between cities and rural areas and such. As to the land, you have swamps in the North West, mountains in the East and around I-24 going south, rolling hills around I-65 going south, etc. Lots of variety. Personally, I would not consider Memphis, and apparently Nashville has changed since I lived there.
 

Blade Runner

Kingfisher
The question is one of "source income" or nexus, but the odds or practicality in them coming after you is low. There is a line written in your tax code that says nonresidents do not pay. The problem is that I'm sure a government who really needs taxes can come up with a reason to make you guilty until proven innocent even if the law is technically on your side. The only scary part for me there is how far they go with penalties (and over how many years or % compounding?) or the fact that they state that unfiled income taxes don't have a statute of limitations.
 

homersheineken

Kingfisher
It depends on the state you are in. Many states have reciprocity agreements with neighboring states if a lot of people commonly live in one state and work in another, for example NY and NJ. Even if they don't the tax rate is typically based on where you live, though without reciprocity you may still need to file in your office/employer's state to get a refund of any taxes that state withheld from you.

Keep in mind a state with no income tax doesn't necessarily mean a lower tax burden. They have to fund services somehow. Usually in states with no income tax, they will have a higher sales tax or real property tax compared to states that have an income tax. They may also assess other taxes like a personal property tax on the value of your car.

You mentioned Tennessee -- they have the highest state sales tax in the country, at 9.53 percent.

Cook County/Chicago enters the chat...
 
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