9 States With No Income Tax: Will You Save Money?

Burned by the steep cost of living over the past few years, many Americans have fled high-priced cities for more affordable places to call home.

One criterion some have used to select their new location: income taxes (or the lack thereof). Nine states exclude all or most of their residents’ income from taxation:

• Eight states charge no income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. (New Hampshire used to tax dividend and interest income, but repealed that tax effective Jan. 1, 2025.)
• Washington taxes long-term capital gains income for high earners. There’s a hefty exclusion of $278,000 in 2025 (that amount adjusts each year for inflation). Only gains above that amount face the 7% tax rate (that rate jumps to 9.9% for capital gains above $1 million).

But while moving to one of these tax-friendly states might seem like the ultimate way to reduce your expenses, you might not always save money in the long run.

For starters, states collect revenue through levies on more than just income, such as sales and property taxes. Plus, other considerations — including the local job and housing markets — may take precedence over taxes, tax preparers and wealth planners interviewed by Bankrate say.

“It’s nice not having taxes taken out of a paycheck, but you can’t look just at the income tax,” says Lisa Featherngill, senior vice president and national director of strategic wealth and business advisory at Comerica Wealth Management. “You have to look at the real estate tax, the sales tax, and then the other taxes that you’re going to pay to the state or county where you’re going to live.”

State taxes: It’s not just about income tax

Not surprisingly, five of the U.S.’s no-income-tax states are at the top of the Tax Foundation’s 2026 State Tax Competitiveness Index: Wyoming, South Dakota, New Hampshire, Alaska and Florida. But there are some interesting anomalies once you go past those top five.

• Two no-income-tax states aren’t in the top 10 on that list. Nevada is at No. 20, partly due to its steep sales taxes (average state and local sales tax are 8.24%), while Washington is at No. 45, landing as one of the 10 least competitive tax states, partly because of its relatively high corporate and sales taxes, according to the Tax Foundation.
• The remaining no-income-tax states  — Texas and Tennessee — land at No. 7 and No. 8, respectively.
• There are three states that do levy an income tax yet still landed in the top 10 for most-tax-competitive: Idaho, Indiana and Montana. That’s at least partly due to low income tax rates. Idaho’s income tax is a flat 5.3%, Indiana’s is a flat 3% and Montana has two tax brackets, with income up to $95,000 facing a 4.7% rate and income above that taxed at 5.65% (the top rate drops to 5.4% in 2027).

Here’s what you need to know about the nine states with no income tax, including the competitiveness of each state’s tax structure, according to the Tax Foundation’s annual study.

Alaska

Alaska ranks fourth for tax competitiveness in the Tax Foundation’s research, in large part because it has no income tax or state-level sales tax (local areas can charge sales tax). And the state’s gas tax is the lowest nationwide. However, its remote location can make the state a more expensive place to live, and it boasts one of the highest corporate tax rates in the country (a maximum of 9.4%).

• Overall rank on tax competitiveness: 4
• Property tax rank: 31, with an effective property tax rate on owner-occupied homes of 1.07%
• Sales tax rank: 5, with average local sales taxes of 1.82%
• Gas tax: $0.0895 per gallon, the lowest in the nation

Florida

Florida is a popular tax and retirement haven, but high home prices and insurance costs have led to state-wide affordability constraints. In December, the median price of a single-family home in the state was $412,200, according to data from Redfin. In the absence of an income tax, the state relies on sales taxes and property taxes. Some household essentials, however, are excluded from taxation, such as groceries.

• Overall rank on tax competitiveness: 5
• Property tax rank: 20, with an effective property tax rate on owner-occupied homes of 0.74%
• Sales tax rank: 16, with an average combined state and local sales tax rate of 7.02%
• Gas tax: $0.3940 per gallon

Nevada

Nevada’s treasury collects much of its revenue from above-average sales taxes and fees. With a tourism-driven economy, however, out-of-state visitors may end up bearing the brunt of those costs.

• Overall rank on tax competitiveness: 20
• Property tax rank: 9, with an effective property tax rate on owner-occupied homes of 0.49%
• Sales tax rank: 41, with an average combined state and local sales tax rate of 8.24%
• Gas tax: $0.2381 per gallon

New Hampshire

New Hampshire doesn’t tax wage income and it has no sales tax. Through tax year 2024 it collected taxes on interest and dividend income, but the state ended that tax effective January 2025. Meanwhile, the state has one of the highest effective property tax rates in the country (1.41%).

• Overall rank on tax competitiveness: 3
• Property tax rank: 44, with an effective property tax rate on owner-occupied homes of 1.41%
• Sales tax rank: 1 (the state doesn’t levy sales taxes)
• Gas tax: $0.2383 per gallon

South Dakota

Not only does South Dakota not collect income taxes, but its state sales tax rate is 4.2%, among the lowest in the country. But municipalities can collect another 1% to 2% on top of that, leading to an average combined state and local sales tax rate of 6.11%.

• Overall rank on tax competitiveness: 2
• Property tax rank: 8, with an effective property tax rate on owner-occupied homes of 0.99%
• Sales tax rank: 31, with an average combined state and local sales tax rate of 6.11%
• Gas tax: $0.3000 per gallon

Tennessee

Tennessee residents don’t have to pay state taxes on their wages. The Volunteer State used to tax dividends and interest in a levy known as the “Hall Tax,” but that was phased out for the 2022 tax year. However, Tennessee has one of the highest state and local sales tax rates in the country at a combined 9.61%.

• Overall rank on tax competitiveness: 8
• Property tax rank: 32, with an effective property tax rate on owner-occupied homes of 0.49%
• Sales tax rank: 47, with an average combined state and local sales tax rate of 9.61%
• Gas tax: $0.2740 per gallon

Texas

Texas doesn’t have an income tax, but it does levy a state sales tax of 6.25%. Local jurisdictions can levy up to 1.95% in additional taxes, for a combined rate of 8.2%. Texas also has a high effective property tax rate of 1.36%.

• Overall rank on tax competitiveness: 7
• Property tax rank: 38, with an effective property tax rate on owner-occupied homes of 1.36%
• Sales tax rank: 36, with an average combined state and local sales tax rate of 8.2%
• Gas tax: $0.2000 per gallon

Washington

Washington doesn’t charge an income tax, but it does levy a tax on long-term capital gains. Still, there’s a hefty exclusion of $278,000 in 2025 (the amount is adjusted for inflation each year) so there’s no tax until you hit gains above that amount. From $278,000 up to $1 million, gains are taxed at 7%. On long-term capital gains above $1 million, the tax rate is now 9.9%, effective for tax year 2025. But there are exceptions. For example, capital gains from real estate are excluded from this tax, and it’s possible to reduce the amount subject to tax through qualified charitable contributions.

• Overall rank on tax competitiveness: 45
• Property tax rank: 25, with an effective property tax rate on owner-occupied homes of 0.75%
• Sales tax rank: 49, with an average combined state and local sales tax rate of 9.47%
• Gas tax: $0.5904 per gallon

Wyoming

In addition to not charging an income tax, Wyoming doesn’t charge corporate levies, nor estate or inheritance taxes, making it the most tax competitive state in the U.S. It has a 4% sales tax and an average combined state and local tax rate of 5.56%.

• Overall rank on tax competitiveness: 1
• Property tax rank: 37, with an effective property tax rate on owner-occupied homes of 0.55%
• Sales tax rank: 6, with an average combined state and local sales tax rate of 5.56%
• Gas tax: $0.2400 per gallon

Should you move to a state with no income tax?

If you’re trying to determine whether moving to a state with no income tax is financially worth it, start by taking a look at your most recent tax return. Calculate how much you paid in state income taxes (some states have a flat rate, while others have a graduated rate) and determine your effective income tax rate. Then, compare that total with what you would be paying in the state you want to move to.

Typically, higher-income earners and retirees can stand to save, Featherngill says. She’s also seen clients consider timing a move to a lower-tax state with a major financial event, such as selling a business or an asset.

But taxation never gives you the full picture, both Steber and Featherngill say. Compare the property tax and sales tax rates of both locations, along with cost-of-living considerations, such as housing and food. Moving costs or a new mortgage in a high-rate era can also add up.

“If property taxes are so high on my house and I have to move and buy something, that might be more expensive, and I might not be in as good a situation as I think,” Featherngill says. “The personal issues become as dominant as the tax issues.”

Family considerations might matter as well. Road trips and plane tickets can quickly add up if you’ll be traveling home to visit loved ones.

Steber, who moved solely because he was transferred for work, also recommends looking into the local job market. If you lose a job and your local area doesn’t have many gigs in your industry, it might be harder to find new work.

“If someone says to me, ‘I’m moving to Texas. It’s free income down there.’ I say, ‘Well, how are you going to live? Are you going to work?’” Steber says. “No income tax can quickly be offset by no job.”

Bottom line

If you’re a retiree, a high-income earner or living in a state that has a high cost-of-living and tax burden, you might stand to save by moving to a tax-friendly state, though be wary about making taxes the sole reason for your move.

“You have to look at the whole picture,” Steber says. “Start with your own simple analysis and have a tax pro kick the tires. Taxes are simply never a reason to make a total financial decision.”