States With No Income Tax in 2026: All 9 States and Their Trade-offs
Last updated 05/27/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
Nine U.S. states currently levy no broad-based individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Living in one of these states eliminates state income tax on wages, salaries, and self-employment income, though each state makes up the lost revenue through other taxes and fees.
- Trade-offs vary by state: States without an income tax often impose higher sales, property, or excise taxes to fund public services — the total tax burden depends heavily on spending habits and property ownership.
- Investment income exceptions: Washington taxes capital gains above $262,000 at 7%, and New Hampshire, until recently, taxed interest and dividend income, so “no income tax” is not always absolute.
- Relocation considerations: Moving to a no-income-tax state delivers the largest benefit to high earners, retirees with pension income, and business owners with significant pass-through income.
State income tax can take a significant bite out of earnings — California’s top rate is 13.3%, Oregon’s is 9.9%, and Minnesota’s is 9.85%. For high earners considering relocation, the gap between a high-tax and a no-tax state can amount to tens of thousands of dollars per year.
The nine states with no income tax
| State | Notable Trade-off | State Sales Tax |
|---|---|---|
| Alaska | No state sales tax; local sales taxes up to 7.5% | 0% |
| Florida | Property taxes vary widely by county; high tourism taxes | 6% |
| Nevada | High sales tax; gaming and tourism revenue subsidize services | 6.85% |
| New Hampshire | High property taxes (among the highest nationally); meals/rooms tax | 0% |
| South Dakota | Above-average sales tax; no corporate income tax either | 4.2% |
| Tennessee | High combined sales tax (9.55% average with local); Hall Tax repealed in 2021 | 7% |
| Texas | Property taxes are among the highest in the nation | 6.25% |
| Washington | 7% capital gains tax on gains above $262,000; high sales tax | 6.5% |
| Wyoming | Severance taxes on mineral extraction; low population density limits services | 4% |
What no income tax actually saves you
The savings depend entirely on how much you earn and what type of income you receive. A single earner making $100,000 in California pays roughly $6,000–$7,000 in state income tax. That same earner in Texas pays zero. At $500,000 of income in California, the state income tax approaches $45,000 annually.
Retirees collecting Social Security, pension income, or IRA distributions benefit significantly in no-income-tax states, since many high-tax states include retirement income in their tax base. Florida and Texas are among the most popular retirement destinations precisely for this reason.
Pro Tip
The Tax Foundation publishes an annual State Business Tax Climate Index and individual tax burden rankings that compare total state and local tax burdens — not just income tax rates. Alaska, Wyoming, and South Dakota consistently rank among the states with the lowest total tax burdens. New Hampshire and Tennessee score better on income tax but worse on property or sales taxes. Comparing the full picture rather than just the income tax rate gives a more accurate estimate of what moving actually saves.
States with no income tax but other notable taxes
Washington: capital gains tax
Washington enacted a 7% capital gains tax in 2021 on long-term gains above $262,000 (indexed for inflation). The state Supreme Court upheld it in 2023. Washington residents who realize large investment gains — from selling a business, stocks, or investment real estate — are not fully sheltered from state tax despite the absence of a broad income tax.
New Hampshire: dividend and interest tax (now repealed)
New Hampshire taxed interest and dividend income at 5% under the “Interest and Dividends Tax” until the tax was fully repealed, effective January 1, 2025. New Hampshire is now a true no-income-tax state for all income types.
Texas and New Hampshire: high property taxes
Texas has no state income tax but imposes some of the highest property taxes in the country, with effective rates often between 1.6% and 2.5% of assessed value. A $400,000 home in Texas can carry $8,000–$10,000 in annual property taxes. New Hampshire’s effective property tax rate is similarly among the highest nationally, averaging around 1.9%.
How does the total tax burden compare across states
According to the Tax Foundation’s 2024 analysis, the states with the lowest overall tax burden (measuring state and local taxes as a percentage of income) are Alaska, Wyoming, Tennessee, South Dakota, and Michigan. Notably, some high-income-tax states like Oregon offset that burden with lower sales or property taxes.
The highest-burden states — Illinois, Connecticut, and New York — combine high income taxes with high property and sales taxes, producing a combined burden significantly above the national average.
Who benefits most from moving to a no-income-tax state
The benefit is not uniform. Taxpayers who gain the most are:
- High earners: Someone in California’s 12.3% bracket saves more in raw dollars than someone in a 3% bracket elsewhere.
- Retirees with large income distributions: States that tax Social Security, pensions, and IRA withdrawals add a substantial burden that no-income-tax states eliminate entirely.
- Business owners with pass-through income: S-corp and LLC profits flow to the owner’s personal return; a high state income tax rate on $300,000 of pass-through income is a high annual cost.
- Remote workers: Employees who can work from anywhere and whose employers are in high-tax states may owe that state’s tax even while living elsewhere — but establishing genuine domicile in a no-tax state cuts that liability after meeting residency requirements.
Good to know: Simply moving to a no-income-tax state is not enough if your former state aggressively audits domicile. California, New York, and Illinois are known for challenging high-income individuals who claim to have relocated. To successfully change domicile, you need to establish a new primary home, update your driver’s license and voter registration, spend the majority of the year in the new state, and document the move carefully. The burden of proof that you have truly left falls on you.
Frequently asked questions
Do I still owe federal income tax in a no-income-tax state?
Yes. Eliminating state income tax has no effect on your federal tax obligation. Federal income tax applies uniformly to all U.S. residents regardless of which state they live in. The savings from a no-income-tax state are exclusively at the state and local level.
Can I avoid state income tax by working remotely from a different state?
It depends on where your employer is located and the state’s sourcing rules. Some states, including New York, use a “convenience of the employer” rule that taxes employees on income earned remotely if their employer is based in that state and the remote work arrangement is for the employee’s own convenience rather than the employer’s necessity. Establishing legal domicile in a no-income-tax state reduces but does not always eliminate this exposure.
Are Social Security benefits taxed in states with no income tax?
No. States that have no income tax do not tax Social Security benefits, pension income, or any other type of income at the state level. This is one of the primary reasons Florida, Texas, and Nevada are popular retirement destinations for people moving from states that tax retirement income.
Does living in a no-income-tax state affect my ability to deduct state taxes federally?
The federal SALT (State and Local Tax) deduction is currently capped at $10,000 per year through 2025 under the Tax Cuts and Jobs Act. Residents of no-income-tax states who itemize can still deduct state sales taxes or property taxes up to that cap. The deduction value is lower for no-income-tax state residents because they have fewer state taxes to deduct, but this rarely offsets the income tax savings.
Which no-income-tax state is best for retirees?
Florida is consistently ranked among the top retirement states due to its combination of no income tax, no estate tax, strong homestead exemptions that reduce property taxes on a primary residence, and a warm climate. Wyoming and South Dakota offer lower overall tax burdens for wealthier retirees, particularly those with large investment portfolios, because neither state imposes capital gains taxes at the state level.
Related reading on income and state taxes
- Federal income tax — explains how the federal tax system works alongside (and independently of) state income tax obligations.
- Property tax — covers how property taxes are assessed locally and why states with no income tax often impose higher property tax rates.
- Sales tax — explains how state and local sales taxes work, and how they often fill the revenue gap in no-income-tax states.
- Tax bracket — a breakdown of how marginal federal income tax rates work, which determines how much a state income tax elimination actually saves at different income levels.
Key takeaways
- Nine states have no broad-based individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
- Washington taxes long-term capital gains above $262,000 at 7%, making it a partial exception; New Hampshire fully repealed its interest and dividends tax in 2025.
- No-income-tax states typically offset lost revenue through higher sales taxes, property taxes, or other levies — the total tax burden varies significantly by state.
- High earners, retirees with large income distributions, and pass-through business owners benefit most from relocating to a no-income-tax state.
- Establishing domicile in a new state requires more than physical presence — former high-tax states like California and New York actively audit high-income individuals who claim to have moved.
If you are evaluating a financial move or managing a tax burden, compare vetted tax relief and advisory services at SuperMoney’s tax relief reviews.
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