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Navigating state income taxes can be a complex task, especially for the self-employed community. Whether you're a freelancer, a gig economy worker like a Lyft or Uber driver, or running your own small business, understanding the tax landscape across different states is crucial for financial planning. Let’s dive into the states with the lowest and highest income tax rates, and explore how Everlance can help self-employed individuals maximize their tax savings.

States Without Income Taxes: A Boon for the Self-Employed

Living in one of the seven U.S. states without an income tax can be particularly beneficial for self-employed individuals. These states include:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington State
  • Wyoming

While these states spare you from state income tax, remember that federal taxes and self-employment taxes still apply. However, the absence of state tax can significantly lighten your overall tax burden.

States with the Highest Income Taxes: What It Means for You

On the other hand, certain states have higher state income tax rates, which can impact your net earnings as a self-employed individual. These states include:

  • California: 13.3%
  • Oregon: 9.9%
  • Minnesota: 9.85%
  • Iowa: 8.98%
  • New Jersey: 8.97%
  • Vermont: 8.95%
  • District Of Columbia: 8.95%

Though these states have higher income taxes, they may offer other benefits like healthcare, infrastructure, or business opportunities that could offset the tax costs.

Everlance: Your Tax-Saving Ally

As a self-employed professional, managing your taxes efficiently is key. This is where Everlance comes in:

  • Track Every Deduction: Use Everlance to accurately track business miles and expenses. This is crucial for states with high-income taxes, where maximizing deductions can significantly reduce your taxable income.
  • Simplified Record Keeping: Everlance makes it easy to maintain detailed records required for self-employment tax reporting, ensuring you claim every eligible expense.
  • Potential Savings: On average, Everlance users save $6,500 per year in deductions. That’s money back in your pocket, which is vital in states with high tax rates.

Additional Strategies for Tax Efficiency

  • Understand Your State's Tax Laws: Each state has unique tax provisions and deductions for self-employed individuals. Staying informed about your state’s specific laws can help you plan better.
  • Consider Relocation: If your work allows, relocating to a state with lower or no income tax could be a strategic move to reduce your overall tax liability.
  • Professional Advice: Consulting with a tax professional can provide personalized strategies based on your specific business and location.

Understanding state income taxes and utilizing tools like Everlance are essential steps towards financial efficiency for the self-employed. By keeping meticulous records and leveraging available deductions, you can navigate the tax landscape confidently, no matter where you're based.

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