9 States With No Income Tax (2025 Guide)

The idea of paying zero state income tax sounds fantastic. Who wouldn't want to keep more of every paycheck? Nine U.S. states currently have no state income tax, and they attract a steady stream of people looking to lower their tax burden. But the full picture is more complicated than a flashy zero-percent headline suggests. These states still need revenue, and they get it through other channels that might hit your wallet in ways you don't expect.

Let's look at all nine states, how they fund their budgets without income tax, and whether relocating actually makes financial sense for you.

The 9 States With No Income Tax

As of 2025, these are the states that do not levy a tax on earned income:

1. Alaska
2. Florida
3. Nevada
4. New Hampshire
5. South Dakota
6. Tennessee
7. Texas
8. Washington
9. Wyoming

New Hampshire is worth a special note. It doesn't tax wages or salary, but it used to tax interest and dividend income at 5%. That tax was fully phased out starting in 2025, making New Hampshire a true no-income-tax state for the first time.

How These States Make Up the Revenue

Governments need money to fund roads, schools, police, and everything else. Without income tax, these states lean more heavily on other revenue sources. Here's where the money comes from:

Higher Sales Taxes

Several no-income-tax states have above-average sales tax rates. Tennessee has one of the highest combined state and local sales tax rates in the country at around 9.55%. Washington comes in at roughly 9.29%. Nevada sits at about 8.23%. Texas averages around 8.20%. These rates hit every purchase you make, and they add up fast. If you spend $40,000 a year on taxable goods and services, a 9% sales tax costs you $3,600. That's not nothing.

On the other hand, Alaska has no state sales tax, though some local municipalities charge their own.

Higher Property Taxes

Texas is the poster child here. The average effective property tax rate in Texas is about 1.60%, well above the national average of roughly 0.99%. On a $350,000 home, that's about $5,600 per year in property tax. Compare that to a state like California, where property taxes are capped by Proposition 13 and the effective rate averages around 0.71%. New Hampshire also has notably high property taxes, averaging about 1.86%.

Severance Taxes and Natural Resources

Alaska, Wyoming, and to some extent Texas and Nevada benefit from natural resource extraction. Alaska's economy runs heavily on oil revenue. Wyoming leans on mineral extraction. These sources help fund government operations without burdening individual taxpayers as much, but they also make state budgets vulnerable to commodity price swings.

Tourism and Gaming Revenue

Nevada generates substantial revenue from gaming taxes and tourism. Florida benefits from tourism-related sales taxes and has no shortage of visitors spending money year-round. This effectively shifts some of the tax burden to out-of-state visitors.

Calculate Your Tax Savings

Use the calculator below to see what you'd pay in federal taxes on your income. Then consider: would the savings from eliminating state income tax be offset by higher costs in other areas?

State-by-State Breakdown

Alaska

No income tax, no state sales tax, and residents actually receive money from the state through the Permanent Fund Dividend (around $1,300-$1,600 per person in recent years). The catch? Alaska has a high cost of living, especially for housing, food, and transportation. The cold climate and remoteness drive up everyday expenses significantly. It's great for tax savings but tough on your grocery bill.

Florida

The most popular destination for tax-motivated moves. Florida combines no income tax with a relatively moderate cost of living in many areas (though Miami and South Florida are exceptions). The sales tax is 6% at the state level, and local additions bring it to around 7-7.5% in most counties. Property taxes average about 0.80%, which is below the national average. For many people, Florida offers the best overall package among no-income-tax states.

Nevada

No income tax, but the sales tax is high at 8.23% combined. Property taxes are moderate. The Las Vegas metro area offers affordable housing compared to neighboring California, which drives a lot of migration from the West Coast. Reno has become increasingly popular with tech workers for the same reason.

New Hampshire

No income tax on wages and, as of 2025, no tax on interest and dividends either. However, New Hampshire has the third-highest property tax rate in the country. If you own a home, the property tax burden can easily exceed what you'd pay in income tax in neighboring Massachusetts or Vermont. New Hampshire is best for renters or people with modest homes and high incomes.

South Dakota

No income tax, no corporate income tax, and a moderate sales tax of about 6.40% combined. Property taxes are around 1.08%, close to the national average. South Dakota has a low cost of living overall, making it genuinely affordable. The trade-off is geographic - it's not exactly a hub for high-paying industries outside of financial services.

Tennessee

No income tax (the old Hall Tax on investment income was eliminated in 2021). But Tennessee has one of the highest combined sales tax rates in the country at 9.55%. That's a meaningful cost if you're a big spender. Property taxes are relatively low at about 0.56%, which is a nice offset. Nashville and Memphis offer strong job markets, especially in healthcare and logistics.

Texas

No income tax, but high property taxes averaging 1.60%. If you own a $400,000 home in Texas, you're paying about $6,400 per year in property tax. The sales tax is about 8.20% combined. Texas is a huge state with enormous variation in cost of living. Houston and Dallas metro areas offer relatively affordable housing, while Austin has become much more expensive in recent years.

Washington

No income tax on wages, though Washington recently introduced a 7% capital gains tax on gains exceeding $250,000. The sales tax is high at about 9.29% combined. Property taxes are moderate at roughly 0.84%. Washington has some of the highest average incomes in the country thanks to the tech sector in the Seattle area, so the absence of income tax is particularly valuable for high earners.

Wyoming

No income tax, low sales tax (about 5.36% combined), and moderate property taxes. Wyoming benefits from mineral extraction revenue, keeping the overall tax burden on residents among the lowest in the nation. Like South Dakota, the trade-off is geography and limited job market diversity.

Does Moving to a No-Tax State Actually Save You Money?

It depends entirely on your situation. Here's a framework for thinking about it:

• High income, modest spending, renting: You'd likely save money in most no-income-tax states, especially Florida, Tennessee, or Washington.
• Homeowner with expensive property: States like Texas and New Hampshire could eat up your income tax savings in property tax, especially on homes over $400,000.
• Heavy consumer spending: High sales tax states like Tennessee and Washington will chip away at your savings with every purchase.
• Low to moderate income: The savings from eliminating state income tax are proportionally smaller, and moving costs might not be worth it.

According to the Tax Foundation, the total state and local tax burden varies less than you might think. Some no-income-tax states like Washington and Texas still rank in the middle of the pack for overall tax burden because of their higher sales and property taxes. Alaska and Wyoming consistently rank among the lowest total-tax-burden states, but they come with significant lifestyle trade-offs.

Other Factors to Consider

Taxes are important, but they're not the whole story. Before relocating for tax reasons, think about:

• Job opportunities: A 5% income tax savings is meaningless if you take a $20,000 pay cut.
• Cost of living: Housing, healthcare, groceries, and insurance all vary by state and city.
• Quality of services: States with lower taxes sometimes have fewer public services, less-funded schools, or different healthcare access.
• Remote work flexibility: If you can work remotely, a no-income-tax state becomes much more attractive since you keep your high-tax-state salary.

The Bottom Line

The nine no-income-tax states offer real savings for the right person, but "no income tax" doesn't mean "no taxes." Every state collects revenue somehow. The smart move is to calculate your total tax burden - federal, state income, property, and sales - along with cost of living, before making any decisions. For high earners who can work remotely, states like Florida, Tennessee, and Washington can deliver meaningful savings. For homeowners, the property tax situation in Texas or New Hampshire might surprise you. Run your own numbers, and let the math guide the decision.