When it comes to long haul trucking, you might be paying taxes to a state you never really are in. California is notorious for collecting taxes for income not only out of the state, but out of the country. Take a look at this picture below, courtesy of taxfoundation.org
You will see 7 white states: Alaska, Nevada, Washington, Texas, South Dakota, Wyoming, and Florida
Alaska may be unrealistic for a trucker to live in that has no routes going through Canada or specifically around Alaska. However, for most truckers doing long haul routes not in the northeast, moving to one of these tax free states can result in a significant savings. One of the worst here is California, where any income between $44,000 and $1,000,000 is taxed at 9.22%, no matter where in the country you earned the income. Being an official resident of any of the taxable states makes you subject to their state income tax. Your ability to switch states may depend on whether you are an owner operator or a signed with a carrier.
Doing Southwest routes – you are best off having your residence in Nevada.
Doing Northwest routes – you are best off having your residence in Washington.
Doing Southeast routes – you are best off having your residence in Florida.
Doing routes in Mid-America – you are best off having your residence in South Dakota.
Doing Mountain area routes – you are best off having your residence in Wyoming.
If your routes are mostly in the Northeast, if there is a state you frequently take loads to that is tax free, you are best off residing there and then finding loads you can haul back and forth, with your ultimate residence being the tax free state.
This also does not mean that some states might try to tax you for work done in their states or payments coming from their states, but this will avoid the vast majority of state income taxes of any kind.
If you have any questions please post below in the comments.
If you think you could benefit from the help of a tax attorney, schedule a consultation with one of our expert tax attorneys here or call us at (888) 515-4829.
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