Economy & Jobs
The 5 Best States for Self-Employment
If you’ve developed a marketable skill set and have the resources to run your own business, self-employment may be your ideal career path. Aside from being your own boss, being self-employed means shouldering the responsibility of managing your budget, correctly distributing your time, and paying your own taxes.
Choosing which state to live and work in is an important decision for those who are self-employed. The state you choose will affect your cost of living and overall quality of life, and it will determine how much of your earnings go toward self-employment taxes to cover Social Security and Medicare.
Here are five of the best states for independent workers to call home.
Texas boasts the second largest self-employed population in the country—nearly 935,000 in 2012, according to Economic Modeling Specialists International (EMSI). That’s an increase of 31 percent from 2001. The state caters to independent workers with its low cost of living and no state income tax liability. Three of the Lone Star State’s cities make Kiplinger’s 2014 list of the 10 cheapest U.S. cities: Temple, Wichita Falls, and Harlingen. Kiplinger ranks Harlingen as the number one cheapest city in the U.S., thanks to a cost of living that falls 18.4 percent below the U.S. average and a median home value that falls just below $80,000. You can also maximize your income by securing affordable housing in McAllen, San Marcos, and San Antonio.
Like Texas, self-employed residents of Nevada are not subject to a state income tax. And like Texas, Nevada’s self-employed sector grew by 31 percent between 2001 and 2012, according to EMSI, bringing this population up to about 70,000. While cost of living is a bit higher than the national average, Nevada’s self-employed residents can take advantage of attractively-priced housing options, with median home prices hovering around $182,000.
EMSI reports that about 166,000 Oregon residents were self-employed in 2012. Portland, in particular, is a major hub for the Freelancers Union, according to NerdWallet. This national organization offers a number of membership benefits to freelancers, including health insurance, freelancer networking events, retirement planning, and tax resources. Another bonus of living in this state? Oregon charges zero state sales tax.
Florida boasts a significant self-employed population: nearly 600,000 in 2012, per EMSI statistics, an increase of 25 percent since 2001. Whether you set your sights on Miami, Fort Lauderdale, Orlando, or other bigger cities in Florida, you can take advantage of not paying any state income taxes on your self-employment earnings in this state. NerdWallet reports that the fashion industry, Web design, and lifestyle businesses make up a significant portion of the freelancing community in Miami, where almost 15 percent of all workers are freelancers.
Proximity to natural attractions and a comfortable climate most days of the year make Arizona an attractive destination for freelancers. Tucson and Phoenix offer freelancers low housing and health insurance costs, as well as a low state income tax rate—just 4.5 percent for the top bracket. Freelancers and self-employed business owners can take advantage of Freelancers Union Spark and independently run Meetup groups. So it’s no surprise that Arizona experienced the highest growth in self-employment between 2001 and 2012, according to ESI: 36 percent, bringing the population up to 215,000.
Finding the right state to settle in when you’re self-employed can be challenging, because you need take into account certain employment costs. If you’re considering relocating or starting a new business as an independent worker, explore options for residency in these five states that cater more than others toward those who are self-employed.