So, you want to keep more of your paycheck. Who doesn't? When you look at your pay stub and see that chunk of change disappearing into the state’s pockets, it’s natural to start Googling no state tax states us to see where the grass is greener. Honestly, the idea of a 0% state income tax rate sounds like a dream, especially if you’re living somewhere like California or New York where the top brackets feel like a gut punch.
But here is the thing.
Governments are rarely in the business of giving away services for free. If they aren’t taking a cut of your salary, they are almost certainly getting that money from somewhere else. It might be your property tax bill. It might be an extra two cents on every dollar you spend at the grocery store. Sometimes, it’s a "tourist tax" that ends up hitting locals anyway.
Moving to a tax-friendly state isn't just about the income tax line item; it's a massive lifestyle shift that requires looking at the total cost of living. You've gotta look at the whole picture before you hire the moving truck.
Which Places Actually Make the Cut?
As of right now, there are nine states that don't collect a traditional individual income tax on wages. You probably know the big hitters. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have been on this list for a long time. Tennessee joined the club fully in 2021 when it finished phasing out its tax on interest and dividends. New Hampshire is the "sorta" member of the group—it doesn't tax earned income, and it is currently in the middle of a multi-year plan to phase out its tax on interest and dividends by 2027.
It’s a diverse group. You have the frozen tundra of Alaska and the humid swamps of Florida. You have the tech hubs of Seattle and the wide-open cattle ranges of Wyoming.
The Texas and Florida Magnet
Texas and Florida are the poster children for the no state tax states us movement. They’ve seen massive population booms over the last decade. People are fleeing high-tax coastal cities in droves.
In Texas, the trade-off is glaringly obvious the moment you buy a house. Texas consistently has some of the highest property tax rates in the entire country. According to the Tax Foundation, the effective property tax rate in the Lone Star State often hovers around 1.6% to 1.8%, while the national average is closer to 1%. If you own a $500,000 home, you might be looking at $9,000 or more a year just to stay in it. You saved $5,000 on income tax but handed $6,000 back to the county.
Florida does things a bit differently. They lean heavily on sales tax and the massive revenue generated by millions of tourists visiting Disney World and Miami Beach. Because tourists pay a huge chunk of the state's bills through hotel taxes and sales tax on souvenirs, residents get a bit of a break. But wait. Have you checked home insurance rates in Florida lately? With the rising frequency of hurricanes and the volatile insurance market, many Floridians are finding that their "tax savings" are being swallowed whole by insurance premiums that have tripled in five years.
The Washington State Anomaly
Washington is a weird one. For the longest time, it was the "pure" no-income-tax state for the Pacific Northwest. But things are changing. While they still don't tax your paycheck, they recently implemented a 7% capital gains tax on the sale of long-term assets like stocks or bonds—provided the profit exceeds $250,000.
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The state Supreme Court upheld it, despite many arguing it was a back-door income tax.
Also, Washington has one of the highest state sales taxes in the nation. If you live in Seattle, you’re looking at a combined state and local sales tax rate of over 10%. Every time you buy a laptop, a car, or even a pair of shoes, you are paying a premium. This is what economists call a "regressive tax." It hits lower-income earners way harder than the wealthy because a larger percentage of a poor person's income goes toward buying taxable goods.
Alaska: The Only True Free Lunch?
If you really want to talk about no state tax states us, Alaska is the ultimate outlier. Not only is there no state income tax, but there is also no state-level sales tax.
Wait, it gets better.
The state actually pays you to live there through the Permanent Fund Dividend (PFD). This is money generated from the state’s oil wealth. In 2023, every eligible resident got $1,312.
But—and there is always a "but"—Alaska has a brutal cost of living. Almost everything has to be shipped in. A gallon of milk or a box of cereal in a remote Alaskan town can cost double or triple what it costs in the lower 48. Plus, you have to deal with months of darkness and sub-zero temperatures. It turns out the government isn't taxing you, but the geography sure is.
Beyond the Paycheck: What You’re Actually Trading Away
When a state doesn't have income tax revenue, they have to make tough choices about infrastructure and services.
Take Nevada. They fund a massive portion of their budget through gambling taxes and mining. It works for them because of the sheer volume of money flowing through the Vegas Strip. However, Nevada’s public school system consistently ranks near the bottom of national lists. If you’re a parent, the money you save on taxes might end up going straight into private school tuition because the local public school is struggling.
Infrastructure is another hidden cost. Some of these states rely heavily on tolls. Driving across certain parts of Florida or Texas can feel like you’re being nickeled and dimed every few miles.
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The Remote Work Revolution
The landscape of no state tax states us shifted violently during the COVID-19 pandemic. When everyone realized they could work from a laptop, the "tax flight" accelerated.
But there’s a legal trap here.
If you work for a company based in New York but you live in Florida, New York might still try to tax you under their "convenience of the employer" rule. They argue that if your job is technically based in Manhattan, you owe them money regardless of where your desk is. Several states are currently fighting in court over these "telecommuter taxes."
Don't assume that moving to Wyoming automatically wipes out your tax bill if your employer is in a high-tax state. You need to check the specific reciprocity agreements and state laws, or you might find yourself filing two different tax returns and owing money to a state you haven't visited in a year.
Is it Actually Worth It?
It depends on your bracket.
If you are earning $40,000 a year, the difference between a 4% state tax and 0% is only $1,600. That $1,600 can easily be wiped out by higher gas prices, more expensive car registration fees, or a slight bump in rent.
If you are earning $400,000, that 4% is $16,000. Now we are talking about real money. At high income levels, the math almost always favors the no-tax state. This is why you see billionaires like Elon Musk moving to Texas or Jeff Bezos moving to Florida. When you're dealing with those numbers, the "hidden" costs of sales tax or property tax are just a drop in the bucket compared to the income tax savings.
The Retirement Angle
Retirees flock to these states for a reason.
If you’re living on a fixed income, 401(k) withdrawals, or a pension, not having the state take a bite out of your retirement nest egg is huge. South Dakota has become a massive hub for "full-time RVers" for this exact reason. You can establish residency there relatively easily, pay no income tax, and keep your vehicle registration costs low while you travel the country.
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However, retirees also need to look at healthcare. A state with no income tax might have a less robust social safety net or fewer subsidized senior services. You have to weigh the tax savings against the quality of the local hospital system.
A Quick Look at the Other Taxes
To truly understand no state tax states us, you have to look at the "Total Tax Burden." The WalletHub "Tax Burden" study is a great resource for this. They look at property tax, individual income tax, and sales/excise taxes as a share of total personal income.
Interestingly, some states with income taxes actually have a lower total tax burden than states without them.
For instance, New Hampshire has no sales tax and no earned income tax, but their property taxes are legendary. You might pay more to live in a modest house in Concord than you would in a much larger house in a state that has a modest income tax.
The Emotional Cost of Moving
Numbers are one thing. Life is another.
I’ve seen people move to Austin, Texas, from Seattle specifically to save on taxes. Three years later, they moved back. Why? They missed the mountains. They couldn't handle the 105-degree heat for four months of the year. They found that the "savings" didn't compensate for the fact that they were miserable in their environment.
A tax strategy is a great financial tool, but it's a terrible way to choose a home. You have to like the culture, the weather, and the community. If you hate where you live, no amount of tax savings will make you feel rich.
Actionable Steps for Your Next Move
If you are seriously considering a move to one of the no state tax states us, don't just look at a map and pick one.
- Run a Shadow Budget: Take your current spending and "re-map" it to your target city. Look up the specific property tax rate for the neighborhood you like. Check the local sales tax. Look at your utility bills—cooling a house in Las Vegas is much more expensive than cooling a house in Maine.
- Talk to a CPA: If you own a business or have complex investments, the "exit tax" or residency audit from your current state can be a nightmare. Some states, like California, are famous for auditing people who leave to ensure they actually moved and aren't just pretending to live in Nevada while spending 200 days a year in Malibu.
- Check the "Fees": States without income tax often have higher fees for things you wouldn't expect. Look at the cost of registering your car, the cost of a driver's license, and even the "sin taxes" on alcohol and tobacco.
- Evaluate the "Why": Are you moving to save money, or are you moving because you want a fresh start? If it's purely for the money, make sure the math actually works. Use a total cost of living calculator that includes "effective tax rates," not just "nominal tax rates."
Moving for tax reasons is a classic American tradition. It’s part of the reason the country was founded. Just make sure you aren't trading a transparent tax for a dozen hidden ones that end up costing you more in the long run. Taxes are inevitable; where you pay them is the only thing you can really control.
Audit your life, calculate the real numbers, and then decide if the 0% is worth the trade-off. Every state has its price. You just have to decide which currency you want to pay it in.