State Tax Comparison for Dividend Income
Compare after-tax dividend income across all 50 states and discover potential savings from relocation.
No-Tax States
Nine states (AK, FL, NV, NH, SD, TN, TX, WA, WY) have no state income tax on dividends. Moving to one of these states can save thousands annually.
Tax Treatment Varies
Most states tax dividends as ordinary income at full rates. Unlike federal tax, qualified dividends don't get preferential treatment at the state level.
Retiree Benefits
States like PA, DE, GA, and SC offer special exemptions for retirement income. Check if your state has age-based deductions or credits.
Understanding State Dividend Taxation
How State Taxation Differs from Federal
While federal tax law gives preferential treatment to qualified dividends (0%, 15%, or 20% rates), most states tax dividends as ordinary income at your full marginal rate. This means even qualified dividends from stocks like SCHD get taxed at your state's top bracket.
The No-Tax State Advantage
Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For a retiree earning $50,000 annually in dividends, relocating from California (13.3% rate) to Florida could save over $6,600 per year — $66,000+ over a decade.
Retiree-Friendly Special Provisions
Several states offer exemptions specifically for retirement income:
- Pennsylvania: 3.07% flat rate, but retirement income (IRA, 401k, pensions) fully exempt
- Illinois: 4.95% rate, but retirement distributions not taxed
- Iowa: Phasing to 3.9% by 2027, retirement income exempt
- Delaware, Georgia, South Carolina: Partial exemptions for age 62+ or 65+
When Relocation Makes Sense
Consider the full picture beyond just tax savings:
- Cost of living differences (property taxes, insurance, etc.)
- One-time moving costs (typically $10k-$20k)
- Quality of life factors (climate, healthcare access)
- Estate tax implications (6 states still have estate tax)
Use our break-even calculator above to see how long it takes for tax savings to cover moving costs.
Frequently Asked Questions
Do I have to pay state tax on out-of-state dividends?
You pay state income tax based on your state of residency, not where the company paying dividends is located. If you live in California, all your dividend income is taxed by California regardless of whether it comes from a Texas oil company or New York bank.
Are REITs and BDCs taxed differently at the state level?
No special treatment in most states. REIT dividends and BDC distributions are typically taxed as ordinary income at the state level, even though they may receive different treatment federally. The no-tax states remain your best option for tax-free REIT income.
Can I change my residency to save on taxes?
Yes, but you must establish genuine residency in the new state (typically 183+ days per year, driver's license, voter registration, etc.). States audit high earners who claim residency changes. Consult a tax professional before attempting state residency arbitrage.
What about municipal bond interest?
Most states exempt interest from in-state municipal bonds but tax out-of-state muni bonds. If you live in a high-tax state and invest in dividend stocks, your after-tax returns may actually be better with qualified dividend stocks than out-of-state municipal bonds.
Track Your After-Tax Returns
Use the DivAgent Portfolio App to see real-time projections of your dividend income with state tax calculations built in.
Open Portfolio App →Disclaimer: This tool provides educational estimates only. Tax calculations use simplified top marginal rates and do not account for income brackets, standard deductions, credits, or local taxes. State tax laws change frequently.
Always consult a licensed tax professional or CPA before making investment or relocation decisions based on tax considerations. DivAgent is not a tax advisor.