We get asked constantly about the most TAX-FRIENDLY state to transfer residency when you are trying to leave the U.S. (either permanently or temporarily), or in the case of RV explorers and part-time snowbirds, the best state for retirees who only want to spend a few months out of the year in one place and the rest of the year in a warmer tropical climate.
Note: This advice is coming directly from our accountant, who also took the plunge and became a digital nomad several years ago and now works remotely year-round. This is not intended to be legal or tax advice, just general advice that anyone can verify themselves.
Top 5 Tax-Friendly States for Digital Nomads
1. Nevada: Best privacy, no personal income tax, no corporate income tax. Allows anonymous LLCs. Shareholders in a NV corporation can also remain anonymous.
2. Florida: No personal income tax. Does impose a 5.5% corporate income tax.
3. Texas: No personal or corporate income tax, but does levy a gross receipts tax.
4. Alaska: No personal income tax. There is a corporate income tax.
5. Wyoming: No corporate or personal income tax.
Our Accountant, Chris: If you plan to live the life of a snowbird or be a digital nomad, the best state to establish residency is Nevada. Nevada has no corporate or personal income tax as well as the best privacy laws. Nevada collects most of its revenue through sales taxes, as well as taxes on the casino and hotel industries. Nevada is the only state that does not share information with any other state or the IRS, and Nevada is one of the few states that allows anonymous LLCs. Shareholders in a Nevada corporation can also remain completely anonymous.
This can prevent unwanted individuals from having access to your private information, and it also cuts down on spam, unwanted mailings, and solicitations from businesses and individuals trying to sell you things when you open a new business (one of my pet peeves!).
All the major cities in Nevada (Las Vegas, Reno, Carson City) host several popular incorporation and mail forwarding services targeted towards expats and snowbirds that make transferring residency and setting up a corporation or other entity in Nevada very easy to do. Corporations and LLCs do have to file an annual list every year, which costs several hundred dollars, but can be filed online. If you don't have a corporation or an LLC, then it is much cheaper. In Las Vegas, for example, a home-based sole proprietorship or general partnership costs nothing to set up, the business license is free. And there are no state-level tax return filings in Nevada.
Nevada also has the benefit of several big cities and a wide range of climate and terrain. In Tahoe, you can enjoy beautiful mountains, skiing, fresh air, and the beautiful Lake Tahoe for fishing or water activities. If you like nightlife, or if you like live events, concerts, parties and gambling, there's Las Vegas. And everything in between.
Florida and Texas are close seconds, and preferable to Nevada in terms of climate if you want to live in the states at least part-time. Florida and Texas impose no personal state income tax, but they do have some types of franchise/corporate tax on a businesses' gross income.
Florida imposes a 5.5% corporate income tax. In Texas, businesses with $1.18 million to $10 million in annual receipts pay a franchise tax of 0.375% on their gross receipts.
Alaska isn't a bad choice, either. There's no personal income tax, but there is a corporate tax. Alaska imposes a corporate tax ranging from 0% to 9.4%, spread across ten tax brackets.
It's also less accessible than any of the lower 48 states. Actually getting to Alaska if you need to do anything related to your residency requires a long drive and a border crossing, or an airline flight over Canada. And the harsh Alaskan winters are not for the faint of heart. But to be fair, there are many people who love Alaska's unspoiled wilderness. Plus, the summers in Alaska are rumored to be absolutely spectacular.
Wyoming is also another good choice, from a tax perspective. This state also imposes no personal income tax, but the landscape is isolated and rather bleak, (I've driven through the whole state and there isn't much to see in Wyoming). So if you're not planning to actually live there at least part of the year, Nevada is a better choice in terms of privacy as well as tax benefits.
No website or company has paid a fee to be mentioned in this blog. Any suggestions you see are based solely on our own experiences and personal preferences.
Just a middle-class family with three young kids, looking to escape the rat race. This is our journey!
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