As of 2025, nine U.S. states have chosen to forgo state income taxes on earned wages. This decision has a significant impact on residents, economic development, public services, and migration patterns. In this guide, you will find an in-depth look at these states, their revenue structures, the benefits and challenges they face, and important considerations if you are thinking about relocating.
A Little History of Income Tax in America
Long before modern tax codes, early American colonies like Plymouth, Massachusetts Bay, New Haven, and Connecticut experimented with taxing based on the productive capacity of property and even non-farming activities. Fast forward to 1911—Wisconsin introduced the first modern state income tax, setting a trend that many states would follow. Today, some states have boldly chosen a different path, driven by ideas about economic growth, personal freedom, and a leaner government.
The States Without State Income Tax
As of 2025, these nine states have no tax on earned wages:
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Each state has its own twist on how to generate revenue without income taxes, and I find it pretty intriguing how they get creative!
Alaska
Alaska’s secret is its rich oil reserves. No state sales tax exists here (though local areas might add a bit), and property taxes are moderate at about 1.04%. Think of it like getting paid for natural resources!
Florida
Known for its sunny beaches and vibrant tourism, Florida collects revenue mostly from sales taxes (about 7% combined) and attracts many retirees with its warm climate and friendly tax policies. Imagine spending your days by the ocean without worrying about state income tax.
Nevada
Nevada shines with its tourism, especially in entertainment and gambling. It has a sales tax of roughly 8.24% combined, and its property taxes are the lowest among these states at 0.44%. It’s no wonder so many people dream of a life in the bright lights of Vegas without the extra tax burden.
New Hampshire
New Hampshire is unique—it doesn’t tax wages or sales but makes up for it with one of the highest property tax rates at 1.61%. If you’re someone who values simplicity and doesn’t mind paying a bit more for property, this might be the state for you. And by 2026, it will phase out taxes on investment income, which is a win for many.
South Dakota
South Dakota uses a balanced mix of sales taxes (around 6.11% combined) and benefits from banking and financial services. With a property tax rate near 1.01%, it offers a friendly environment for both businesses and families.
Tennessee
Tennessee eliminated its tax on investment income in 2021 and now relies on a combined sales tax of 9.55%. With a very low property tax of 0.48%, it can be a great choice if you’re looking to save on taxes while enjoying vibrant local culture and music, especially around Nashville.
Texas
Texas is huge—in area, population, and economy. It combines sales taxes (about 8.20% total) with higher property taxes (around 1.7%), largely supported by its thriving oil and gas industry. Picture the bustling Texas lifestyle where the benefits of no income tax are balanced by other costs.
Washington
Washington state doesn’t tax most wages but does tax long-term capital gains on high-profit asset sales. Its sales tax averages around 9.38%, and property taxes are moderate at 0.76%. This unique mix makes it an interesting option if you’re into tech or enjoy the Pacific Northwest vibe.
Wyoming
Wyoming, known for its stunning natural landscapes, relies on natural resource extraction—think coal, oil, and natural gas. It offers low sales (about 5.44% combined) and property taxes (0.55%), making it a quiet yet efficient option for those who appreciate wide-open spaces.
How Do These States Make It Work?
Without an income tax, these states have to find other ways to keep the lights on. Here’s a breakdown of their strategies:
Sales Taxes
Sales taxes are a major revenue source. For example, Tennessee charges about 9.55% when you combine state and local taxes, while Washington collects nearly 9.38%. However, New Hampshire is the outlier here with no sales tax at all.
Property Taxes
Property taxes vary widely. New Hampshire and Texas have higher rates compared to states like Nevada and Alaska. If you’re a homeowner, it’s important to consider how these rates might affect your overall tax bill.
Natural Resource Revenues
States like Alaska, Wyoming, and Texas benefit from natural resources. Imagine living in a place where the local economy is boosted by oil or mineral extraction—it’s a different world from states relying on consumer spending.
Tourism and Entertainment Taxes
Places like Florida, Nevada, and Tennessee capitalize on tourism. Special taxes on hotels, theme parks, and gaming allow them to keep income tax at bay while still funding public services.
Pros and Cons: What’s the Catch?
Pros
- Tax Savings for High Earners: If you’re earning a high salary, skipping state income tax can mean significant savings. You might find yourself with more money for investments, savings, or even that dream vacation.
- Simpler Tax Filing: Fewer forms and less paperwork mean you can avoid the headache of state tax returns. This is a bonus for anyone who’d rather spend time on what they love.
- Appealing for Retirees: Imagine enjoying your retirement with more of your Social Security and pension benefits in your pocket. States like Florida and Texas are favorites for retirees.
- Economic Growth and Migration: More people are moving to these states, which can boost local economies and lead to improved public services.
Cons
- Higher Sales and Property Taxes: These states often compensate for no income tax with higher sales and property taxes. If you’re on a tight budget, this could be a downside.
- Regressive Tax System: Sales taxes tend to hit lower-income households harder. Everyone pays the same rate, so the impact isn’t evenly distributed.
- Potential Funding Gaps: Without income tax revenue, public services like education and infrastructure might face challenges. This could affect things like road quality, schools, and healthcare.
- Higher Cost of Living: In states like Washington or New Hampshire, the overall cost of living may be high, which can cancel out some of the tax benefits.
Personal Considerations Before Making a Move
Before you decide to pack your bags and head to a no-income-tax state, it’s important to look at the complete picture. For instance, you might love the idea of saving on taxes, but what about the overall cost of living or the quality of public services?
Calculate Your Total Tax Picture
Think about all the taxes you pay—property, sales, and even special fees like vehicle registration. This holistic view will help you see if the move really makes financial sense for you.
Factor in the Cost of Living
Housing, insurance, and everyday expenses vary widely. You might find that while you save on income tax, you end up paying more for a home in a popular area like metropolitan Texas or parts of Florida.
Evaluate Public Services and Quality of Life
Ask yourself, “What matters more: tax savings or access to excellent schools, healthcare, and infrastructure?” Personal priorities vary, and this decision is all about finding the right balance for you.
Looking Ahead: Future Trends and Changes
The tax landscape is always shifting. With remote work on the rise, many people are rethinking where they want to live. For instance, tech workers might choose states like Texas or Florida to maximize their savings. Additionally, evolving budget pressures mean that states may need to adjust their tax strategies in the future.
A great example is New Hampshire phasing out its tax on investment income by 2026, further aligning itself with other no-income-tax states. These changes highlight how dynamic the world of state taxes really is.
Final Thoughts
Choosing to live in a no-income-tax state isn’t just about saving money on your paycheck—it’s about weighing all aspects of your financial and personal life. While high-income earners and retirees may see clear benefits, the overall advantage depends on your individual circumstances, such as housing costs and public service quality.
Personally, I think it’s all about balance. If I were considering a move, I’d look at the entire package—not just the promise of no income tax, but the lifestyle, community, and long-term financial picture. After all, it’s not just about where you save money; it’s about where you feel at home.
I hope this guide helps you navigate the exciting world of no-income-tax states and makes the decision-making process a little easier.
