We all agree that taxation seems like a burden at some point in our lives. It can compel us to consider moving to a state or country which is tax-free. So, what states have no income tax?
As of 2025, there are the only eight US states without a state income tax. New Hampshire also does not tax wages. However, it taxes interest and dividends.
The eight states may not charge regular income tax. However, it is vital to know the whole story. Many cities make up for it by charging greater taxes in other areas, including property, sales, or certain excise taxes.
For instance, Washington does not tax earned income but it does tax capital gains for certain high-income citizens. Tennessee and New Hampshire have also taxed investment income in the past. However, Tennessee’s Hall Income Tax will be gone entirely by 2021. L&Y Tax Advisors further explains what states have no income tax in the US.
What is State Income Tax?
A state income tax is a tax that states charge on the money that people who live in the state and those who do not live there but work there make. These taxes have quite different rates, brackets, and allowed deductions.
Some jurisdictions have a flat tax. It means that everyone pays the same rate regardless of how much they make. Other states have a progressive tax system – the more you make, the higher your tax rate.
The existence or absence of a state income tax significantly affects how much money a person takes home. This should be a significant concern when comparing the tax loads of various states.
However, even states that do not have an income tax still make money in other ways, which may compensate for some of the financial benefits.
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What States Have No Income Tax?
| State | Sales Tax | Average Local Tax Rate | Effective Property Tax Rate | Affordability Rank | Cost of Living Rank | Housing Affordability Rank |
| Percentage (%) | (th) | |||||
| Alaska | 0 | 1.82 | 1.07 | 35 | 36 | 30 |
| Florida | 6 | 1 | 0.71 | 39 | 38 | 40 |
| Nevada | 6.85 | 1.39 | 0.44 | 33 | 28 | 39 |
| New Hampshire | 0 | 0 | 1.61 | 44 | 45 | 42 |
| South Dakota | 4.2 | 1.91 | 1.01 | 5 | 4 | 7 |
| Tennessee | 7 | 2.55 | 0.48 | 18 | 17 | 18 |
| Texas | 6.25 | 1.95 | 1.47 | 28 | 29 | 31 |
| Washington | 6.5 | 2.88 | 0.76 | 47 | 48 | 45 |
| Wyoming | 4 | 1.44 | 0.55 | 19 | 20 | 22 |
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Living in a State With No Income Taxes
Living in a state that does not have an income tax might be good for your finances. You get to keep more of your salary. You do not have to pay taxes on your
- Social Security
- Retirement income
You should consider the possible challenges, such as greater:
- Sales taxes
- Property taxes
- Fewer public services
Read: What is VAT number in the US?
Pros
- More money in your pocket.
- In many circumstances, there is no Social Security or pension income tax.
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Cons
- More taxes in other places.
- In states with no income tax, the cost of living may be higher.
The Bottom Line
It is easy to answer the question ‘What states have no income tax?’ But deciding to migrate is not as easy. Think about all the money-related effects, such as sales and property taxes, job opportunities, and changes in your lifestyle. Be aware of the regulations and dates for residence so you may lawfully set up your home and get the most tax benefits.
Also, read: How do I avoid dividend tax in USA?
