You've seen the TikToks. Some guy in a sleek office leans into the camera and tells you that moving to Florida or Texas is a "cheat code" for your bank account. He makes it sound like a 5% to 10% raise just for changing your zip code. It sounds incredible. Honestly, it sounds like free money. But there is no such thing as a free lunch in the United States tax system. States still need to pave roads, pay teachers, and keep the lights on in the capitol building. If they aren't taking a slice of your paycheck, they’re getting that money from somewhere else.
Nine states currently operate without a traditional state income tax. These are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire also sits on this list, though it’s a bit of a technicality since they only recently started phasing out taxes on interest and dividends. If you live in one of these spots, your federal tax bill remains the same, but that state-level line item on your W-2 is a big, beautiful zero.
It changes how you think about your career. Suddenly, a $100,000 salary in Austin feels a lot different than $100,000 in San Francisco or New York City. But before you rent the U-Haul, you have to look at the "hidden" costs. Every state has a "tax burden." This is the total percentage of personal income that goes toward state and local taxes. Sometimes, states with no state income tax actually end up being more expensive for the average middle-class family than states with a modest income tax. It's a bit of a shell game.
The Trade-Off: Property Taxes and Sales Tax
Texas is the perfect example of this reality. Texas has no state income tax, which is great for high earners. However, Texas has some of the highest property taxes in the entire country. According to data from the Tax Foundation, Texas often ranks in the top ten for property tax rates. If you own a home, you might save $5,000 on income tax but end up paying that exact same $5,000—or more—to your local school district and county. You aren't really "saving" the money; you're just changing who you write the check to.
Then there’s the sales tax. When a state can’t tax your income, they often tax your spending. Tennessee has no state income tax, but it has one of the highest combined state and local sales tax rates in the nation, often hovering around 9.55%. Think about that. Every time you buy a shirt, a toaster, or a new laptop, you’re paying a massive premium. For a lower-income family that spends most of their paycheck on goods rather than saving it, a high sales tax can actually be more "regressive" and painful than a progressive income tax.
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The Alaska Exception
Alaska is the true outlier. It’s the only state that has neither a state income tax nor a state-level sales tax (though some local municipalities have sales taxes). How do they do it? Oil. The state funds its operations largely through royalties on petroleum. In fact, Alaska actually pays you to live there through the Permanent Fund Dividend. But there is a catch. The cost of living in Alaska is sky-high. Groceries, heating, and fuel are significantly more expensive because almost everything has to be shipped in. You might save on taxes, but you’ll spend a fortune at the grocery store.
Washington State and the Capital Gains Twist
If you're a high-net-worth individual or a tech worker with a lot of stock options, Washington used to be the ultimate haven. It’s home to Amazon and Microsoft, and for decades, it was the go-to for tax-free living in the Pacific Northwest. But things are changing. Recently, Washington implemented a 7% tax on long-term capital gains for amounts exceeding $250,000.
Critics argued this was an unconstitutional income tax. The state Supreme Court disagreed. They labeled it an "excise tax." It’s a subtle distinction, but it matters. It shows that even "tax-free" states are looking for ways to tap into the wealth of their residents to fund things like early childhood education. If you’re moving there specifically to avoid taxes on a massive stock sale, you might want to read the fine print first.
Why Remote Workers are Flooding Florida
Florida is currently the "it" state for the remote work crowd. Unlike Texas, Florida’s property taxes are relatively moderate, thanks to the Save Our Homes assessment limitation, which caps how much the assessed value of your primary residence can increase each year. This creates a massive incentive for people to move there, buy a "forever home," and stay put.
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But Florida faces a different kind of "tax": insurance. Because of the increasing frequency of hurricanes and the volatility of the reinsurance market, homeowners' insurance premiums in Florida have spiraled out of control. Many residents find that the money they saved on state income tax is now being devoured by insurance companies. If your insurance premium jumps from $2,000 to $8,000 in three years, that "tax-free" lifestyle starts to feel like a myth.
The Myth of the "Cheap" State
Don't confuse a low-tax state with a low-cost state. Nevada, specifically Las Vegas, has seen a massive influx of Californians. No income tax! Close to the West Coast! But as demand rises, so do prices. Rent in Vegas isn't the bargain it was ten years ago. When you calculate your cost of living, you have to look at the "Big Four":
- Housing (Rent/Mortgage)
- Taxes (Income, Sales, Property)
- Insurance (Auto, Home, Health)
- Everyday Expenses (Utilities, Food, Gas)
In some cases, a state like New Hampshire is incredibly attractive because it has no sales tax and no earned income tax. It's a paradise for shoppers. But again, look at the property taxes. New Hampshire consistently has some of the highest property tax rates in the country to compensate for the lack of other revenue streams. If you’re a renter, you might feel the win. If you’re a homeowner, you’re the one funding the state.
Is It Worth It for Your Career?
There is also the "opportunity cost" to consider. Sometimes, people move to a state with no income tax and take a pay cut because the local labor market isn't as competitive as a hub like New York or DC. If you save 6% on taxes but earn 15% less in gross salary, you’ve actually lost ground.
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However, for freelancers, business owners, and remote employees who can keep their "big city" salary while living in a "low tax" state, the math is often undeniable. This is why towns like Sioux Falls, South Dakota, have become unexpected hubs for the financial services industry. South Dakota has no corporate income tax and no personal income tax, making it a magnet for banks and trust companies.
What You Need to Do Before Moving
If you are seriously considering a move to one of the states with no state income tax, you need to run a "shadow budget." Don't just look at the tax brackets.
First, go to a site like Zillow and look at the tax history of a few homes in the area you're eyeing. You’ll see exactly what the previous owners paid in property taxes. It’s often shocking. Second, check your auto insurance. Moving from a rural part of a taxed state to a city like Miami or Las Vegas can double your car insurance premiums.
The Residency Audit Trap
One thing people often get wrong: you can't just "say" you live in Florida while spending nine months a year in your apartment in Manhattan. States like New York and California are aggressive about "residency audits." If they think you're faking your move to avoid taxes, they will come after you for the back taxes, interest, and penalties. You have to prove "domicile." This means changing your driver's license, registering to vote, moving your "near and dear" items (like family photos and pets), and actually spending more than 183 days in the new state. They even track cell phone tower data and credit card swipes in some high-stakes audits.
Actionable Steps for Your Next Move
- Calculate your Total Tax Burden: Use the Tax Foundation’s "State and Local Tax Burdens" report to see the actual percentage of income residents pay in your target state versus your current one.
- Get an Insurance Quote First: Before you fall in love with a house in Florida or Texas, call an insurance agent. Get a real quote for homeowners' and auto insurance. This is the "hidden tax" that kills most budgets.
- Audit Your Spending: If you spend a high percentage of your income on taxable goods, a state with a 9% sales tax (like Tennessee) might actually be worse for you than a state with a 3% income tax and a 5% sales tax.
- Check the "Retirement Friendliness": If you’re moving for retirement, check how the state treats Social Security and 401(k) withdrawals. Most no-income-tax states are great for this, but some states with income taxes actually exempt retirement pay anyway.
- Consult a Pro for "Exit Taxes": If you’re leaving a state like California with significant assets, talk to a tax strategist about how to break residency properly so you don't get hit with a surprise bill two years later.
Moving for tax reasons is a valid strategy, but it requires more than just a map and a dream. It requires a calculator and a very realistic look at how you spend your money every day.