Seeing a lower tax bill always brings joy to a breadwinner, but many states tax your income. To escape this, you should move to a state with no income tax at all. You’ll be able to keep 100% of your earnings this way.
Below are nine states without income tax in the U.S. They’re not just more affordable to live in, but you might enjoy the other benefits such as national parks and more. You’ll find the states listed in alphabetical order.
States Without Income Tax in the U.S.
1. Alaska
Alaska has the lowest tax burden in the entire U.S., as it doesn’t have a state income tax or sales tax, even if local areas can charge one. As a result, the total Alaskan taxes equal only 5.16% of a resident’s income. No other state can compete with this.
However, one disadvantage of living in Alaska is how remote it is. Thus, the living costs are high compared to other states.
Even though Alaska has low taxes, they still get a payment from the Alaska Permanent Fund Corp. This fund consists of revenue from investment earnings from mineral lease rentals.
Out of all states, healthcare costs in Alaska are the highest. The fees rise daily, and, at the end of the day, you may find the number too great for comfort.
2. Florida
Living in the tropical climate of Florida is many people’s dream, hence why many vacationers prefer the Sunshine State. Both sales and property taxes in Florida are above the national average, but it doesn’t tax a resident’s income. Overall, the tax burden comes at 6.82%, which is among the five lowest in the entire nation.
It’s still not highly affordable to live in Florida because it has higher living costs, and houses cost more. Florida ranks above Alaska in terms of living costs. However, many are willing to spend more to live in this beautiful and comfortable state.
The state spends very little on the school system, but the healthcare spending is much higher than the national average.
Many people still retire to Florida once they can afford it. In fact, a majority of the population consists of retirees.
3. Nevada
Nevada also has no income tax, but it generates revenue primarily from higher sales taxes. Clothes, alcohol, gambling, and hotels are all heavily taxed (very little is immune to taxing). The overall state tax burden is 8.39%, the highest on our list of states without an income tax.
While the sales tax is high, the living costs are near the bottom. Therefore, people find living in Nevada much more affordable than other states.
Nevada also doesn’t spend as much on education, allocating $9,417 of funds for each student’s schooling. However, healthcare spending is the lowest on our list, ranking as the fourth-lowest.
4. New Hampshire
Currently, New Hampshire taxes dividends and interest, but not income. The Senate passed legislation to slowly eliminate investment income tax by 1% per year. The plan is expected to culminate in 2027.
Excise taxes and property taxes make up for having no personal income tax and decreasing investment income taxes. Currently, the state’s tax burden is 6.85%, with only five other states having lower tax burdens. The living costs are also relatively moderate, just slightly above average.
New Hampshire takes education seriously, spending almost $17,000 per pupil, and pours significant funds into healthcare. Therefore, New Hampshire is known for excellent educational and medical benefits if you’re concerned about these systems.
5. South Dakota
South Dakota doesn’t rely on income tax for its revenue. Instead, it heavily taxes cigarettes and alcohol. The state also has a unique situation of being the home of several major credit card companies. This has helped the people enjoy zero income taxes, even if the property tax rates are higher.
In all, the residents of South Dakota pay only 7.86% of their income in taxes. That’s a very low tax burden, contributing to the state’s incredible affordability. In addition, it’s said that South Dakota is an excellent state for retirees.
Healthcare is one of the state’s most significant expenses, ranking at 14th place in the nation. While South Dakota also spends more on education, it doesn’t have the best school funding distribution.
6. Tennessee
After 2016, Tennessee started deducting income taxes by 1% per year. In 2021, the state’s income tax was eliminated. Initially, Tennessee did not tax income wages, only taxing investment income, but now all income is untaxed.
To offset the loss, the state has high sales taxes and the most substantial beer tax in all of America, at $1.29 a gallon.
These changes are geared toward attracting retirees who earn more from investments. Overall, the tax burden is only 6.18%, with only two other states lower.
Living in Tennessee is slightly above the nation’s affordability average, and the state is beloved by its residents.
The state doesn’t spend too much on education but does distribute these funds fairly. However, the healthcare system can use a boost, as it ranks relatively low.
7. Texas
The Republic of Texas, also known as the Lone Star State, despises personal income taxes. The state’s constitution was written to prevent any implementation of income taxes. Nevertheless, Texas prefers to tax sales and earn from excise taxes to pay for services.
Overall, the state tax burden of Texas is 8.20%, an alarming increase compared to Alaska. Depending on the jurisdiction, the sales tax can reach 8.25%, and Texas property taxes are higher than many other states.
Many citizens consider Texas an affordable state to reside in. The state also boasts stunning views and desert landscapes.
Texas’ taxes are well-managed, as education receives sizeable support. However, the state does spend little on healthcare at the 7th lowest in the United States.
8. Washington
Washington’s residents are exempt from any income taxes while in the state, though they pay extra sales and excise taxes. As a result, compared to other states, gasoline will cost more in Washington.
The overall tax burden is at 8.32%, which is somewhat higher. This number is also often cited alongside higher living costs and housing prices as deterrents.
However, the state is still amiable and welcoming to newcomers. Many people enjoy living in Washington despite having to pay more. If you don’t mind higher living expenses in exchange for one of the best locations to live in, go for it.
The state spends extensively on education, allocating more funds than other states per pupil. However, Healthcare is only slightly below the national average as well.
9. Wyoming
Wyoming has the opposite of a dense population, falling second behind Alaska. There’s only one human being living there per square mile on average.
The people do enjoy no state income taxes, personal or corporate. In addition, the retirement income taxes, property taxes, and sales taxes are also relatively low.
The tax burden of this state is thus only 6.47%, which is close to Alaska and Florida. Retirees who don’t like Florida may consider moving to Wyoming when the time comes.
Wyoming is also similar to Alaska in that both states tax natural resources to make up for having no income tax. However, the particular resource that makes revenue for Wyoming and Alaska is oil.
In terms of affordability, Wyoming is only three places below the middle out of a ranking of all states. You can expect to save more money when compared to living in California. Many people enjoy living here despite the low population density.
The state does spend incredible amounts on education and moderately on healthcare. However, the school funds are distributed fairly and efficiently, and Wyoming has received high acclaim for these efforts.
Should I Move to One of These States?
It’s best to take a look at your tax return first. If you find one of these states has a lower individual income tax rate, you can consider moving. Before doing so, it’s always essential to research heavily.
Other factors to consider are property and sales taxes. States without income tax tend to have higher rates than those you may be living in now.
These states may also have expensive housing or a low population. While the latter may not be a problem for you, some people don’t enjoy a quiet home in the middle of nowhere.
Healthcare is also a concern. Some of the states above spend a lot of revenue on healthcare services, but many don’t. As a result, those who require frequent medical attention may have to think before moving.
However, if you already live in a state with a high tax burden, moving to any of these nine states may be a good idea. This is because all of these states have lower tax burdens, saving you a lot of money in the long run.
Taxes Are Always Certain
Taxes are one of two things that everyone will encounter in life, but these nine states without an income tax are attractive options for your next move. Make sure you don’t make escaping high tax burdens the sole reason, as there are always other factors to consider.