Nine U.S. states charge no income tax on wages. But the full picture is more complicated — these states fund services through other taxes that may or may not save you money depending on your situation.
Table of Contents
The 9 States With No Income Tax
| State | Income Tax | Sales Tax | Avg. Property Tax Rate | Overall Tax Burden Rank |
|---|---|---|---|---|
| Alaska | 0% | 0% (local varies) | 1.04% | Very Low |
| Florida | 0% | 6.00% | 0.80% | Low |
| Nevada | 0% | 6.85% | 0.53% | Moderate |
| New Hampshire | 0% | 0% | 1.86% | Moderate |
| South Dakota | 0% | 4.50% | 1.08% | Low |
| Tennessee | 0% | 7.00% | 0.56% | Low |
| Texas | 0% | 6.25% | 1.60% | Moderate |
| Washington | 0% | 6.50% | 0.87% | Moderate |
| Wyoming | 0% | 4.00% | 0.55% | Very Low |
How No-Income-Tax States Fund Their Budgets
Without income tax revenue, these states rely on alternative funding sources:
Sales Tax
Most no-income-tax states have above-average sales taxes. Tennessee’s combined state and local sales tax rate averages 9.55%, one of the highest in the nation. Texas averages 8.20%.
Property Tax
Texas and New Hampshire have notably high property taxes. A $400,000 home in Texas can cost $6,400+ per year in property taxes alone, compared to about $2,000 in Hawaii.
Natural Resources
Alaska and Wyoming benefit from oil, gas, and mineral extraction revenues. Alaska even pays residents an annual dividend from its Permanent Fund (about $1,300–$3,200 per year).
Tourism and Other Revenue
Nevada and Florida benefit from tourism-related taxes and fees. Nevada generates significant revenue from gaming taxes.
Tax Savings Comparison by Income Level
The actual savings from living in a no-income-tax state depend heavily on your income:
$50,000 Salary
| State | State Income Tax | Property Tax (on $250k home) | Sales Tax (~$25k spending) | Total State/Local Taxes |
|---|---|---|---|---|
| Texas | $0 | $4,000 | $2,050 | $6,050 |
| Florida | $0 | $2,000 | $1,500 | $3,500 |
| California | ~$1,500 | $1,750 | $1,913 | $5,163 |
| New York | ~$2,400 | $3,250 | $2,000 | $7,650 |
$150,000 Salary
| State | State Income Tax | Property Tax (on $500k home) | Sales Tax (~$60k spending) | Total State/Local Taxes |
|---|---|---|---|---|
| Texas | $0 | $8,000 | $4,950 | $12,950 |
| Florida | $0 | $4,000 | $3,600 | $7,600 |
| California | ~$10,500 | $3,500 | $4,590 | $18,590 |
| New York | ~$8,900 | $6,500 | $4,800 | $20,200 |
At higher income levels, the savings from no income tax become more significant, which is why many high earners and retirees relocate to states like Florida and Texas.
Best No-Income-Tax State for You
If You’re a High Earner
Florida or Wyoming offer the best combination of no income tax with relatively low property and sales taxes.
If You’re a Retiree
Florida and Tennessee are popular for retirees because they have no income tax on retirement income, relatively low property taxes, and warm climates.
If You’re a Homeowner
Nevada, Wyoming, and Tennessee have low property tax rates, making them attractive for homeowners.
If You Value Low Overall Costs
Wyoming, Alaska, and South Dakota tend to have the lowest overall tax burdens.
States Moving Toward No Income Tax
Several states are actively reducing or eliminating their income taxes:
- Iowa is phasing to a 3.9% flat rate
- Mississippi is reducing rates with the goal of eventual elimination
- Arkansas has lowered its top rate to 3.9%
The Catch: What No Income Tax Doesn’t Tell You
- Higher cost of living — Florida and Texas metros like Miami, Austin, and Dallas have seen dramatic cost-of-living increases
- Property tax surprises — A $500,000 home in Texas costs about $8,000/year in property taxes vs. $4,250 in California
- Fewer services — Some no-income-tax states spend less on education, infrastructure, and social services per capita
- SALT deduction impact — With the $10,000 SALT cap on federal returns, the federal tax benefit of living in a high-tax state is limited anyway
Total Tax Burden by State
Looking at income tax alone doesn’t tell the full story. Here are total effective tax rates combining income, sales, and property taxes for a median household:
| Rank | State (Lowest Total Burden) | Effective Total Rate |
|---|---|---|
| 1 | Alaska | 4.6% |
| 2 | Wyoming | 6.4% |
| 3 | Tennessee | 6.5% |
| 4 | South Dakota | 7.0% |
| 5 | Florida | 7.1% |
| … | … | … |
| 46 | Connecticut | 12.8% |
| 47 | New Jersey | 13.2% |
| 48 | Illinois | 13.4% |
| 49 | California | 13.5% |
| 50 | New York | 15.9% |
Related: State Income Tax Rates | Federal Income Tax Brackets | Cost of Living by State | Average Income by State
