As of 2025, eight U.S. states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming. Washington state doesn’t tax regular income either but does impose a capital gains tax on certain high-income individuals.
However, this doesn’t mean residents in these states are entirely free from state taxes. Many of them still collect revenue through property taxes, sales taxes, or other fees. While relocating to a no-income-tax state can potentially reduce your total tax liability, it’s important to weigh other financial factors like property taxes and overall cost of living before making a move.
States With No Income Tax: What You Need to Know Before Moving:-
- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming are among the few states that do not impose a state income tax. While Washington doesn’t tax regular income, it does apply a capital gains tax for certain high-income residents.
- However, states without an income tax often make up for it through other means, like higher sales or property taxes. These additional tax burdens can sometimes exceed those in states that do tax income.
- Before relocating to one of these states, think about factors like lifestyle, access to public transport, local job markets, and the quality of state services.
- To benefit from living in a no-income-tax state, you’ll need to become a legal resident. This typically means living there for most of the year and officially establishing your home base in that state.
What Is State Income Tax ?
A state income tax is levied directly by a state on income earned in or from the state. State income taxes, like those at the federal level, are self-assessed, with individuals filing a tax return to the state.
The laws surrounding taxes, such as what’s considered income or what can be deducted, the rates filers pay, as well as the procedures and forms that accompany taxes, are set at the state level and therefore can vary widely. Some states apply a flat rate, where everyone pays the same percentage of their income to the government, or a bracket-based system that determines rates based on how much you earn.
Note:-
Like federal taxes, states require individuals to file their taxes by Tax Day, typically held on April 15.
State Individual Income Tax Rates and Brackets, 2025
Living in a State With No Income Taxes
Living in a no-income-tax state might sound ideal—keeping more of your paycheck is certainly appealing. But before making a move, it’s important to look at the bigger picture. Take Nevada, for instance: there’s no income tax, but the sales tax is above the national average, according to the Tax Foundation.³ Here’s a closer look at the key advantages and drawbacks of living in a state with no income tax.
Pros and Cons of Living in a State With No Income Taxes
Typically, do not tax retirement income
May also have lower property and sales taxes
Possibility of culture shock if moving from a higher cost-of-living area
May have reduced job prospects
Pros Explained
- States that don’t charge income taxes usually don’t tax retirement income either. This can be a major advantage for retirees looking to stretch their savings. However, it’s important to think beyond taxes. Health care availability and affordability, being near loved ones, and access to services for seniors are also key considerations.
- In addition, states without income taxes may offer lower property or sales tax rates. For instance, New Hampshire has no sales tax at all, though its property taxes are on the higher side.
Cons Explained
- Sure, avoiding state income tax sounds great—but it’s not always as simple as packing your bags and heading south. Moving from a high-tax state like New York to a tax-friendly place such as Florida might save you money, but it could also bring a serious lifestyle adjustment. The culture, pace of life, and even day-to-day experiences can be drastically different.
- Job availability is another major factor to consider. Many companies are moving away from remote work and requiring employees to return to the office. So even if you’re currently working from home, relocating to a state with no income tax might limit your future job options if the local job market isn’t strong.
Also, don’t overlook the importance of your legal domicile. Just moving to a new state doesn’t immediately free you from your old tax obligations. To qualify as a permanent resident of a no-income-tax state, you typically need to live there for at least six months of the year. Only then can you claim that state as your new tax home.
Warning
Having residency in two different states can mean paying taxes in both places.
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States With No Income Taxes
Alaska
Alaska stands out with no state sales tax, a modest average local tax rate of 1.82%, and a property tax rate of 1.07%. In terms of affordability, it ranks 35th, while its cost of living places it at 36th, and it comes in 30th for housing affordability.
Florida
Florida applies a 6% state sales tax, along with a 1% average local tax rate, and has a relatively low property tax rate of 0.71%. The Sunshine State is ranked 39th in affordability, 38th in cost of living, and 40th for housing affordability.
Nevada
Nevada features a 6.85% sales tax, an average local tax rate of 1.39%, and a property tax rate of just 0.44%. When it comes to affordability, Nevada ranks 33rd, with a 28th place ranking in cost of living, and 39th in housing affordability.
New Hampshire
New Hampshire is one of the few states with zero sales or local taxes, though it has a higher property tax rate of 1.61%. The state ranks 44th in overall affordability, 45th in cost of living, and 42nd in housing affordability.
South Dakota
South Dakota imposes a 4.2% sales tax, with a 1.91% average local tax rate, and a property tax rate of 1.01%. It ranks well—5th in affordability, 4th in cost of living, and 7th in housing affordability.
Tennessee
Tennessee charges a 7% sales tax, has a 2.55% average local tax rate, and maintains a property tax rate of 0.48%. The state holds the 18th spot in overall affordability, 17th in cost of living, and 18th in housing affordability.
Texas
Texas has a 6.25% sales tax, a 1.95% average local tax rate, and a property tax rate of 1.47%. It ranks 28th in affordability, 29th in cost of living, and 31st in terms of housing affordability.
Washington
Washington state enforces a 6.5% sales tax, coupled with a high average local tax rate of 2.88%, and a property tax rate of 0.76%. However, it ranks 47th in affordability, 48th in cost of living, and 45th in housing affordability.
Wyoming
- Wyoming keeps things light with a 4% state sales tax, a 1.44% average local tax rate, and a low property tax rate of 0.55%. It ranks 19th in affordability, 20th in cost of living, and 22nd in housing affordability.
Comparison of States with No Income Tax
| State | Sales Tax | Avg. Local Tax Rate | Effective Property Tax | Affordability Rank | Cost of Living Rank | Housing Affordability Rank |
|---|---|---|---|---|---|---|
| Alaska | None | 1.82% | 1.07% | 35th | 36th | 30th |
| Florida | 6% | 1% | 0.71% | 39th | 38th | 40th |
| Nevada | 6.85% | 1.39% | 0.44% | 33rd | 28th | 39th |
| New Hampshire | None | None | 1.61% | 44th | 45th | 42nd |
| South Dakota | 4.2% | 1.91% | 1.01% | 5th | 4th | 7th |
| Tennessee | 7% | 2.55% | 0.48% | 18th | 17th | 18th |
| Texas | 6.25% | 1.95% | 1.47% | 28th | 29th | 31st |
| Washington | 6.5% | 2.88% | 0.76% | 47th | 48th | 45th |
| Wyoming | 4% | 1.44% | 0.55% | 19th | 20th | 22nd |
Bottom Line
Moving to a state without income tax might sound like a smart way to hold on to more of your hard-earned money. However, it’s important to look at the full picture before making the leap. Some living expenses could actually be higher in your new state, and job opportunities might not be as plentiful depending on the industry and location.
Also, be mindful of your official domicile status and plan your move strategically. Ideally, you’ll want to live in the new state for the majority of the tax year to avoid complications.
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