State & Local Tax
As a trader operating a virtual business, you can move to a tax-friendly state.
Traders have unique tax issues on state and local income tax returns for business entities and individuals. Moreover, state and local tax regimes vary significantly. The preferred business entity for a trader is an S-Corp pass-through entity, which is free of entity-level federal taxation. Some states and cities subject S-Corps to taxation. ( Read A Few States Tax S-Corps: Traders Can Reduce It.)
As a trader operating a virtual business, you can move to a tax-friendly state. For example, if you retire from a job in high-tax California, New York State/City, Massachusetts, or New Jersey, you can move to tax-friendly Texas, Florida, or Washington.
Seven states do not have individual income tax regimes including Texas, Florida, Washington, Nevada, South Dakota, Alaska, and Wyoming. Tax Foundation publishes a handy state map: State Individual Income Tax Rates and Brackets for 2016.
“Currently, fifteen states and the District of Columbia have an estate tax, and six states have an inheritance tax. Maryland and New Jersey have both,” according to Tax Foundation’s Does Your State Have an Estate or Inheritance Tax? Many of the states with an estate or inheritance tax are in the northern part of the country.
According to Tax Foundation, “Forty-four states levy a corporate income tax. Rates range from 3 percent in North Carolina to 12 percent in Iowa.” (See your state on the Tax Foundation map, State Corporate Income Tax Rates and Brackets for 2017.)
In my five-part series “Trader Tax Battle Of The States,” I focus on state and local tax systems for S-Corps, LLCs, and partnerships. I mention basic information about individual income tax, estate and inheritance tax regimes.
Trader Tax Battle Of The States:
- California Vs. Texas
- New York Vs. Florida
- Midwest Vs. Southeast Top 10 States
- New Jersey, Washington & Massachusetts
- Nevada Vs. New Hampshire
Watch our Webinar recording: Best, Worst & The Decent Tax States For Traders.
If you have any questions about state & local tax matters, please contact us.