Tax Exempt States for Full Time RVing

Rollnhome wrote:
If you earn money in a state you pay their state taxes on the money. Everyone pays Fed Tax (if owed). If you live in South Dakota and earn money in New York you pay New York state income taxes. Buying an RV you ultimately pay sales tax to your resident state. the state in which you register the RV and show proff of residence.

This also varies by state. Some tax out of state resident on income earned in the state. Others tax their own residents on income earned out of state. Sometimes there is a "foreign state" tax credit based on reciprocity, but not always, so double taxation is possible.

I had to pay state income tax on income earned in Norway, Egypt, China, and Venezuela, paid through a Cayman corporation, because it was paid to me while residing in Oklahoma. There was not a foreign tax credit applied to my state taxes, although there was a credit toward my federal taxes.

It gets complicated, best to get the specifics, rather than generalize on what any single state does.

There is no state where making it your domicile lets you escape Federal income tax if you have taxable income. Not even moving out of the U.S. exempts you, if you are a U.S. citizen or U.S. legal resident, although the tax rules change once you start paying foreign taxes. (I paid enough income tax to the PRC in two years to cover five years of U.S. tax).

There are states with no income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two tax only interest and dividend income. Some don't tax some part or, or all of, income from pensions, retirement savings plans or Social Security payments. Some don't tax interest income paid within the state.

Five states have no sales tax: Alaska, Delaware, Montana, New Hampshire, Oregon, although Alaska allows municipalities to collect a sales tax. Some states with a sales tax do not collect sales tax on motor vehicles. But they might collect an excise tax, a one-time or annual ad valorem tax (on vehicles and other personal property) or allow counties and/or municipalities to collect the tax.

Not often considered, some states have substantial estate taxes, inheritance taxes, or both (double dipping) and others have neither or very high exemptions. Some states use intangible taxes for income, because these tend to be quite progressive.

What state works for you having the lowest overall taxes thus depends on your income, the sources of your income, your property holdings, and your intangible wealth.

People tend to look at "no income tax" as being important even if they have little taxable income or the tax is in fact quite low. It might be that your income tax would be something like $1200 a year and property tax $400, and a state with no income tax collect $6000 on property and intangibles. Some of the states with the lowest per capita tax bills have a small income tax.

There is a second side of the picture: how easy is it to domicile in a state without actually living there? This is the full-timer problem, involves matters like voter registration, ID and/or driver's licenses, vehicle licensing, and cost, availability and geographic scope of medical insurance.

Put all these together, full-timers end up using Florida, South Dakota and Texas. None are yet pinned down by "real ID" requirements, do not make much issue with using rented addresses. They do not necessarily have the lowest vehicle registration fees, but none tax vehicles ad valorem annually. Texas does have vehicle inspection requirements. Texas and Florida depend more on sales and real property taxes; Florida used to have an intangibles tax but repealed that in 2007.

This all works for full timers because they won't own real estate and will be doing their purchasing where ever they are, paying whatever the local rate. State of domicile may want a use tax, but mechanisms for collecting this are so far ineffective unless it becomes an er satz tax on disposable income, and that is hard to measure if the state does not require filing an income tax return.

If I were full timing and expected to winter in Texas, I would choose Texas, where vehicle registration is particularly cheap and insurance not too bad outside the metro areas, and I could take care of business while there. If I wintered in Florida, I would make that my domicile as a full timer, but if I were a snowbird with a home in another state, I might domicile there instead. I know mostly Michigan snowbirds, and those I know domicile in Michigan rather than Florida, for various personal reasons.

If looking for a state to move into for a low cost retirement, my list would be different, e.g. Florida tends to be expensive, Texas is not so bad, but New Mexico, Missouri and Mississippi also have cost advantages depending on locale. Even some states in the middle of the total tax range, like Oklahoma and Arkansas, can be low cost where property values are low.

Ron3rd wrote:

restlesswind wrote:
, "even California has it's advantages. Property taxes are very low and your purchase price is the tax basis until you sell, so when the property appreciates, your taxes do not rise. There are many Californians who bought their homes years ago and have seen the value increase 10 or 20 fold, yet their property taxes are the same as when they bought the property. That savings can offset a lot of income tax and the other ridiculous fees that California has on virtually everything."

I wish that were true. Property tax in CA can and does increase by 1% per year.
However when property values went out of sight, the prop tax did not rise at the same rate. It jumps to the property is sold.
That is why next door neighbors may have thousands of dollars difference for the same basic home
I lived in CA many years and still own property there.

That's incorrect, CA does not increase property tax by 1% per year. If that were true, I'd be paying about 25% property tax, which I don't. I pay 1% and a small fraction. Your property tax in CA is basically 1% (plus a small fraction) of the purchase price and although it can rise, it is a very, very small fraction of 1%. As noted above, your tax basis is the purchase price. We bought our house 25 years ago for $155K and it's now worth about $600K, but I'm still only taxed on $155K.

Due to Prop 13... Clicky

Ron3rd wrote:
We bought our house 25 years ago for $155K and it's now worth about $600K, but I'm still only taxed on $155K.

Well no wonder the state is in the hole financially! Chris

We fulltime and are Fla. residents. No state tax. 6% tax on vehicles. Can do drivers license renewal by mail at least once. Vehicle registration cost are low. Insurance you would have to compare. Also you do not have vehicle inspections and you do not need any special endorsements to drive an RV. If you want to own a house near the coast well then you will find some higher insurance rates. We owned a home near the coast for 9 years. Went full time again last July. Many out of state folks own cars and trucks tagged in Fla.as they snow bird and leave vehicles here. I believe Texas has vehicle inspections and don't know about license endorsements for heavier vehicles.

If you earn money in a state you pay their state taxes on the money. Everyone pays Fed Tax (if owed). If you live in South Dakota and earn money in New York you pay New York state income taxes. Buying an RV you ultimately pay sales tax to your resident state. the state in which you register the RV and show proff of residence.

JoeGood988 wrote:
We retired out of Missouri and went to South Dakota, turned in titles, drivers licenses and became SD residents...no state income tax, no personal property tax, no sales tax...big savings. Every state has Federal taxes but the rest is a big savings.
You can own property in as many states as you want to, as long as you live in each one less than 180 days a year. Full time RV'rs who travel all over can use this and claim almost any state as a state of residence..Florida, Montana, Texas, South Dakota, etc. Many states have rules that prevent you from claiming as a resident...have to check the laws.
All of our retirement income and other monies go through SD so they don't take out state taxes. We have to return to SD every 5 years to have picture taken for drivers license but voting ballots are mailed to us every voting session. We are excluded from jury duty as we are too far away to attend

The OP asked about state and Fed tax "when purchasing RVs".

South Dakota charges Excise tax on vehicles and RVs of 3%.
If you are registering a used vehicle, which you already paid sales tax on in another state, you will not need to pay twice.

There are five *states* with NO sales tax:
Oregon, Delaware, MT, NH, and Alaska.
(Some sources will say four - as Alaskan municipalities can impose sales tax, which equates to about a 1.7% average for the state.)

Most full-times will "domicile" in either Texas or South Dakota.
BTW - You will find those "Texans" on the Escapees forums - which are chock full of full timers.

If you somehow "avoid" paying Federal tax - you will most likely be "domiciled" - without an RV - in the Gray Bar hotel..:(

BTW - OP - Google is your friend..:W

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Bumpyroad wrote:

JoeGood988 wrote:

You can own property in as many states as you want to, as long as you live in each one less than 180 days a year.

I own property in two states and I certainly live in one more than 180 days. I think you are confusing "residency" requirements.
bumpy

Was speaking of full timers.

Many states want you to be a resident if you own property there and stay there several months each year. My brother has to tell Alabama he isn't a resident each year because he spends a lot of time in his Gulf Shores condo. They want him to pay AL state income tax.

Worry more about total tax load and cost of living.
Each state has different taxing methods and concepts, look at how they impact you and how you want to live.
If a state gets most of it's income from sales and property tax, if you only "reside" in that state, but don't "live" there, and don't own property there, it could be that is a good state for you to "reside" in.
A state with really low taxes, but food, clothing, etc costs lots, that may not be a good state to "live" in.

restlesswind wrote:
, "even California has it's advantages. Property taxes are very low and your purchase price is the tax basis until you sell, so when the property appreciates, your taxes do not rise. There are many Californians who bought their homes years ago and have seen the value increase 10 or 20 fold, yet their property taxes are the same as when they bought the property. That savings can offset a lot of income tax and the other ridiculous fees that California has on virtually everything."

I wish that were true. Property tax in CA can and does increase by 1% per year.
However when property values went out of sight, the prop tax did not rise at the same rate. It jumps to the property is sold.
That is why next door neighbors may have thousands of dollars difference for the same basic home
I lived in CA many years and still own property there.

That's incorrect, CA does not increase property tax by 1% per year. If that were true, I'd be paying about 25% property tax, which I don't. I pay 1% and a small fraction. Your property tax in CA is basically 1% (plus a small fraction) of the purchase price and although it can rise, it is a very, very small fraction of 1%. As noted above, your tax basis is the purchase price. We bought our house 25 years ago for $155K and it's now worth about $600K, but I'm still only taxed on $155K.