States With No Income Tax
Living in a state without income tax might allow you to hold on to more of your hard-earned money. However, it won’t necessarily shield you from other taxes or a higher cost of living.
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Living in a state with no income tax is one strategy for lowering your overall tax burden.
Here’s a breakdown of the pros and cons of living in one and how the cost of living in each state stacks up. Plus, learn more about how states without income tax generate their revenue.
Which states have no income tax?
In 2025, there are nine states without a state income tax:
Alaska.
Florida.
Nevada.
New Hampshire.
South Dakota.
Tennessee.
Texas.
Washington.
Wyoming.
Although Washington does not tax most earned income, it does impose a long-term capital gains tax rate on certain assets. The rate is 7% on capital gains up to $1 million and 9.9% on gains that exceed $1 million.
State | State sales tax | Average local sales tax | Effective property tax rate | Affordability rank |
|---|---|---|---|---|
Alaska | None. | 1.82% | 0.91% | 35 out of 50. |
Florida | 6% | 1.02% | 0.74% | 44 out of 50. |
Nevada | 6.85% | 1.39% | 0.49% | 34 out of 50. |
New Hampshire | None. | None. | 1.41% | 42 out of 50. |
South Dakota | 4.20% | 1.91% | 0.99% | 4 out of 50. |
Tennessee | 7% | 2.61% | 0.49% | 19 out of 50. |
Texas | 6.25% | 1.95% | 1.36% | 30 out of 50. |
Washington | 6.50% | 2.97% | 0.75% | 46 out of 50. |
Wyoming | 4% | 1.56% | 0.55% | 17 out of 50. |
Sources: Tax Foundation and U.S. News & World Report. | ||||
What does it mean to live in a state with no income tax?
At the most basic level, living in a state with no personal income tax means that you’ll get to keep a little bit more of your paycheck. If you’re currently living in a state with high income tax rates, like California, it can seem tempting to book a one-way ticket to Washington. However, moving to a state without an income tax doesn’t mean that you’ll be excused from paying other taxes. For example, if you meet the income qualifications for filing a federal return, you’ll still be expected to do so by the tax filing deadline.
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How the 9 states with no income tax stack up
Alaska
With its lack of income tax and sales tax, America’s largest state is also considered one of the most tax-friendly. When Alaska repealed its personal income tax in 1980, it began taxing oil and gas companies at high rates to generate revenue.
On the downside, Alaska is remote — and can be expensive in other ways. Per the Tax Foundation, Alaska ranks above average compared with other states when it comes to property taxes. U.S. News & World Report also ranks Alaska an overall 35 out of 50 on its affordability list. Contributing factors include higher-than-average housing costs and cost of living.
Most residents can receive an annual stipend, the Alaska Permanent Fund Dividend, which might help offset some costs.
Tax overview
State sales tax: None.
Average local sales tax: 1.82%.
Effective property tax rate: 0.91%.
Affordability ranking
Affordability rank: 35 out of 50.
Cost of living: 39 out of 50.
Housing affordability: 31 out of 50.
Florida
This southern state is a popular retreat for vacationers and retirees alike. Florida generates most of its revenue from property taxes, highway tolls and state university tuition.
However, Floridians may face a higher cost of living relative to other states and a competitive housing market. U.S. News & World Report ranks the state at 44 out of 50 for housing affordability.
Tax overview
State sales tax: 6%.
Average local sales tax: 1.02%.
Effective property tax rate: 0.74%.
Affordability ranking
Affordability rank: 44 out of 50.
Cost of living: 40 out of 50.
Housing affordability: 44 out of 50.
» Learn more: Other Florida state tax payments to know about
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Nevada
One way the tourist destination generates revenue is through a steep tax. Its combined state and local sales tax rate is 8.24%, the 13th highest in the country.
As for overall affordability, U.S. News & World Report positions the state 34 out of 50, with a nod to high housing costs. The property tax rates, however, are among the lowest in the country.
Tax overview
State sales tax: 6.85%.
Average local sales tax: 1.39%.
Effective property tax rate: 0.49%.
Affordability ranking
Affordability rank: 34 out of 50.
Cost of living: 28 out of 50.
Housing affordability: 39 out of 50.
New Hampshire
Prior to 2025, New Hampshire taxed dividends and interest on investment income at a 3% rate. The Granite State also doesn’t impose sales taxes, but it does levy excise taxes on goods such as tobacco.
Where New Hampshire falls short is affordability (ranking 42 out of 50) and cost of living (ranking 44 out of 50). It's also known for its relatively high property taxes.
Tax overview
State sales tax: None.
Average local sales tax: None.
Effective property tax rate: 1.41%.
Affordability ranking
Affordability rank: 42 out of 50.
Cost of living: 44 out of 50.
Housing affordability: 40 out of 50.
South Dakota
South Dakota, home to Mount Rushmore and Badlands National Park, is often lauded as one of the top locations for retirees. For overall affordability, U.S. News & World Report ranks it at 4 out of 50 nationally due to its housing affordability and low cost of living. The state depends on sales and excise taxes to generate revenue, levying taxes on items such as tobacco, motor fuel and alcohol.
Tax overview
State sales tax: 4.2%.
Average local sales tax: 1.91%.
Effective property tax rate: 0.99%.
Affordability ranking
Affordability rank: 4 out of 50.
Cost of living: 3 out of 50.
Housing affordability: 6 out of 50.
Tennessee
The country music hub scores relatively high marks in terms of overall affordability, with the U.S. News & World Report ranking it 19 out of 50. However, according to the Tax Foundation, an area where the state falls short is sales tax, having the second-highest in the nation. Tennessee charges tax on items such as alcohol, beer, fuel and even fantasy sports contests.
Tax overview
State sales tax: 7%.
Average local sales tax: 2.61%.
Effective property tax rate: 0.49%.
Affordability ranking
Affordability rank: 19 out of 50.
Cost of living: 20 out of 50.
Housing affordability: 19 out of 50.
Texas
Texas is the second-largest state in the U.S., and it’s widely known for its “go big or go home” attitude. In fact, Texas’ aversion to income taxes is so strong the ban is listed in the state constitution.
As for overall affordability and cost of living, Texas falls into the middle of the spectrum. U.S. News & World Report rates the state 30 out of 50 in both categories.
Tax overview
State sales tax: 6.25%.
Average local sales tax: 1.95%.
Effective property tax rate: 1.36%.
Affordability ranking
Affordability rank: 30 out of 50.
Cost of living: 29 out of 50.
Housing affordability: 32 out of 50.
» Learn more: Texas state and local sales tax
Washington
Not only does the Evergreen State not have income tax; it also doesn’t impose a corporate income tax. This incentive is no doubt appealing to the many major corporations that have headquarters in the state. However, the state imposes a 7% long-term capital gains tax on profits of $270,000 or more (this limit is subject to an annual inflation adjustment). New for 2025, an additional 2.9% tax will apply to long-term capital gains that are more than $1 million above the annual exemption limit. This makes the highest capital gains tax rate in the state 9.9%.
Washington takes the 46th spot on U.S. News & World Report’s affordability scale. A high cost of living and high housing costs are the primary drivers.
Tax overview
State sales tax: 6.5%.
Average local sales tax: 2.97%.
Effective property tax rate: 0.75%.
Affordability ranking
Affordability rank: 46 out of 50.
Cost of living: 47 out of 50.
Housing affordability: 45 out of 50.
Wyoming
Wyoming is the least populated state in the U.S., with a total of 581,381 residents calling it home, according to 2022 Census data. Because there’s no individual or corporate income tax, the state relies on property, oil, sales and excise tax to generate income. Wyoming scores above average when it comes to cost of living and housing — U.S. News & World Report gives it an overall affordability rank of 17 out of 50.
Tax overview
State sales tax: 4%.
Average local sales tax: 1.56%.
Effective property tax rate: 0.55%.
Affordability ranking
Affordability rank: 17 out of 50.
Cost of living: 15 out of 50.
Housing affordability: 17 out of 50.
Note: State and local sales tax data is from the Tax Foundation and is current as of 2025. Property tax data is from the Tax Foundation and is from 2023, the most recently available data.
Pros and cons of living in a state without income tax
Retirement benefits
Most people can expect to pay at least some taxes during retirement, whether on 401(k) distributions or pensions. If you live in a state without personal income tax, you generally get to skip paying state taxes on retirement income. This can mean more money for your golden years.
Avoiding additional taxes can be a nice retirement perk. But you'll want to weigh these benefits against other important financial and personal factors. For example, some states have fewer public transportation options or less affordable health care. You also might not want to live far away from friends or family.
Other taxes
State taxes are often used to generate revenue for services such as health care or to fund infrastructure. Without this revenue stream, some states end up relying more heavily on other taxes, such as property or sales, to recoup the loss. If you're a homeowner who currently lives in a state with relatively affordable property taxes, it may not be worth giving that up. Living in a state with no income tax also means you might not be able to take full advantage of the state and local tax deduction.
On the plus side, except for Washington, living in an income-tax-free state means any capital gains you earn aren't taxed at the state level. This means you’ll only be responsible for federal capital gains taxes.
Establishing domicile
Several conditions need to be met to reap the benefits of living in an income-tax-free state. Establishing domicile, or the intention of making a state your permanent home, is the most critical one. Rules vary by state, but generally, you must live in a place for at least 183 days to begin qualifying as a permanent resident. In addition, states conduct residency audits, so this will require proof.
Tread carefully here. Say you live in one state but spend a good part of the year in another state. You could be considered a permanent resident of one state and a “statutory resident” of the other. This means you could end up paying taxes on earned income in both states. Tax planning with a professional, such as a financial advisor, is one of the best ways to avoid finding yourself in a sticky tax situation.
Cost (and quality) of living
Perhaps the most critical number to crunch is your cost of living. This includes tallying up the costs of housing (rental or purchase), food, wages, health care and lifestyle. The savings you gain on state taxes might not be worth the extra cost incurred to live comfortably in another state.
Think about your job, as well. Remote work has made it easier than ever to envision moving without risking job security. But if you were to live in a state with limited opportunities in your industry and lose your job, you could face difficulties securing another one.
» MORE: Thinking about a move? Compare the cost of living in two cities using our cost of living calculator.
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