These 9 States Have No Income Tax - But Are They Better Or Worse For Your Finances? Here's everything you need to know.

Income tax can take a toll on your wallet and the bottom line of your business. But not all states in the union levy income tax. Some states, like Texas, have become shopping havens for budget-conscious entrepreneurs, in part because they don't charge income tax.

For comparison, here are the nine states with the highest tax rates:

California - 13.30% Hawaii - 11.00% New York - 10.90% New Jersey - 10.75% Oregon - 9.90% Minnesota - 9.85% Vermont-8.75% Iowa - 8.53% Wisconsin-7.65%

This article will examine nine states with no income tax and explore everything taxpayers need to know about these low-tax jurisdictions.

What is income tax?

Income tax is a crucial source of revenue for states and federal governments around the world. There are several types of income tax you may have to pay depending on where you live.

A personal income tax is levied on the wages, salaries or other income of individuals. States generally impose them.

Corporation tax is levied on businesses and their operating income.

Meanwhile, state and local income taxes are other forms of income tax over which states have more power. These are separate from federal income taxes and subject to each state's specific tax code. Some states, such as California, impose significant income taxes, while others do not levy any additional income taxes.

Related: States with Lowest Corporate Income Tax Rates

Why do some states levy income tax?

Income tax is a very reliable source of income. People have to earn money to spend money, which means collecting an income tax provides local and federal governments with enough funds to build schools, maintain roads, pay for the forces of order and fund all other types of government operations.

Related: Plan Ahead to Avoid Surprises at Tax Time

Which US states do not have to pay income taxes?

Only some states impose income tax on their citizens.

Nine states have no income tax or are about to phase out income tax. These states are:

Alaska Florida Nevada New Hampshire - New Hampshire technically generates investment taxes and interest income, but those taxes will disappear in 2023. South Dakota Tennessee Texas Washington State - note that Washington charges income tax for investment income and capital gains taxes, but only for those who earn a certain amount of money. Wyoming

If you live in one of these states, you'll get more of your money from most sources of income, like your wages and tips.

Related: Small business taxes around the world, mapped: See where the rates are high, low and non-existent

Compare States Without Income Tax

Does that mean you should immediately pack your bags and try to move to one of the states above? Not necessarily. Keep reading to examine each state with no income tax and compare them based on their total tax burden and other factors.

Alaska

Alaska is both a cheap and expensive place. For example, there is no income tax or sales tax. The total tax burden for Alaska is 5.10% - the lowest of the 50 states. In addition to this, all Alaska residents receive an annual payment from the Alaska Permanent Fund Corp.

Yet the cost of living in Alaska is higher than average due to its distance from manufacturing centers...