Whether you have recently opened up a business in Nevada or you are looking to, the issue of state income tax is an important consideration. Brand-new business owners or those coming from other states may not know the ins and outs of tax accounting in Nevada. So, do you need to pay Nevada state income tax?
Is there a Nevada State Income Tax?
The state of Nevada does not levy state income tax to businesses, individuals, or corporate bodies. However, the state sales tax in Nevada is at 6.85%. Other optional taxes can be levied on businesses, which brings the taxes to 8.1%.
Related: What Are the Best Small Business Tax Deductions for 2016?
Without levying taxes, the state ensures that there is rapid growth in the business sector as well as the economy. The business owners who are coming into Nevada enjoy the perks of the state not dipping into their hard-earned profit. In addition, there are states where such state income tax stifles business growth. Therefore, Nevada is a place where no state income tax payment attracts a lot of businesses to the area.
The Pros and Cons of Doing Business in a State with No Income Tax
Naturally, when there is no state income tax, there are advantages and disadvantages. Taxes are necessary in our system as the government makes use of the money to provide public services and improve infrastructure as well as welfare programs.
- Many claim that the absence of a state income tax improves business growth and thus the local economy.
- There is the opportunity for more job creation, and the young and educated typically remain in such states when employment is stable.
- States that do not levy income tax on businesses sometimes outperform those that do.
Because the state needs to pay for public services and must get this capital somewhere, sales taxes are often higher in states with no income tax in order to make up the difference. Unlike income tax, sales taxes do not vary based on the consumer’s income level. This means that:
- The cost of living and doing business in these areas may increase.
- More pressure is placed on lower income individuals who struggle to make ends meet.
From a business standpoint, operations are streamlined with the absence of an income tax, but you will have to price goods and services differently to adjust for that sales tax.
Federal Income Tax Rate in Nevada
The federal income tax rate for Nevada is rather high. It has a marginal tax rate of 25% and an effective tax rate of 17.99% presently. One may not need to pay state taxes on income as a teacher, business owner, or real estate mogul. However, you have to pay federal tax.
Levying income tax by the Nevada state may seem advantageous. Nonetheless, the government still has a way of gaining this tax through sales tax on goods bought and federal taxes as well. When it comes time to do your taxes for the year and all of this still seems confusing, a small business accountant can help you with all of your tax preparation and bookkeeping needs. Give us a call at (702) 471-7223.