For many Americans, the dream of keeping more of their earnings drives important financial choices, including where to live. While everyone pays federal income tax, some states have chosen to forgo personal income taxes altogether. This guide explores the nine states with no income tax, how they fund public services, and what this means for your finances.

Which States Have No Income Tax?

As of 2025, nine U.S. states do not levy a general personal income tax. This makes them attractive to high earners, retirees, and remote workers. However, a couple of exceptions exist—New Hampshire taxes interest and dividends, and Washington recently introduced a capital gains tax for high earners.

Understanding Revenue in No-Income-Tax States

States without income tax still need revenue to operate schools, roads, and healthcare. Here’s how they manage it:

Property Taxes

High property taxes often offset income tax elimination. Texas and New Hampshire, for example, have some of the highest property tax rates in the country, so prospective residents should carefully review local rates.

Sales and Excise Taxes

Tourism-heavy states like Florida and Nevada rely heavily on sales tax, with Tennessee imposing nearly 10% combined state and local rates in many areas. Excise taxes on alcohol, tobacco, and fuel further support state budgets.

Other Sources

Natural resource-rich states, including Alaska and Wyoming, collect severance taxes on oil, gas, and minerals. Nevada profits from gaming taxes, while Texas imposes corporate and franchise taxes. These varied sources allow states to maintain fiscal stability despite lacking income tax revenue.

Pros and Cons of Living in States With No Income Tax

Moving to a state without income tax can be appealing, but it comes with trade-offs.

Advantages:

• Higher Take-Home Pay: More disposable income for investments, savings, or daily spending.
• Attractive to High Earners: Entrepreneurs and executives can save tens of thousands annually.
• Retirement Benefits: Untaxed pensions, Social Security, and 401(k) withdrawals extend retirement savings.
• Economic Incentives: Low-tax environments can stimulate job growth and attract businesses.

Disadvantages:

• Higher Other Taxes: Property and sales taxes can diminish overall savings.
• Regressive Effects: Lower-income households may feel the impact more due to reliance on consumption taxes.
• Potential Public Service Gaps: Reduced tax revenue may limit funding for schools and infrastructure.
• Not Fully Tax-Free: Federal taxes, Social Security, Medicare, and local taxes still apply.

Detailed Look at Each No-Income-Tax State

Alaska: Funded by oil revenue and the Permanent Fund Dividend, residents benefit from occasional payouts. High costs and remote locations can offset savings.

Florida: With no state income tax, Florida appeals to retirees and remote workers. Sales tax is 6%, and high home insurance can affect living expenses.

Nevada: Revenue relies on tourism and gaming. Rapidly rising costs in Las Vegas and Reno can offset savings.

New Hampshire: No general sales or wage tax, but some of the nation’s highest property taxes. Phasing out its interest and dividend tax soon.

South Dakota: Business-friendly, low-cost state with sales and use taxes. Fewer metropolitan amenities exist due to its low population density.

Tennessee: No income tax on wages but very high combined sales taxes. Everyday purchases can be costly despite higher take-home pay.

Texas: Major corporate hub with no income tax, offset by high property taxes and complex franchise taxes.

Washington: Relies on high sales and business taxes, plus a new capital gains tax for top earners.

Wyoming: Low overall taxes with revenue from minerals and energy. Rural lifestyle with ample outdoor activities.

Who Gains the Most?

High-Income Professionals: Entrepreneurs and executives benefit significantly, especially when managing investments through platforms like Ultima Markets MT5.

Retirees: Untaxed retirement accounts help stretch nest eggs. Ensuring your savings are secure via Ultima Markets fund safety is crucial.

Remote Workers: Legal residency in a no-income-tax state can reduce tax liability. However, adherence to residency requirements and cross-state tax laws is essential.

Conclusion

Living in a state with no income tax can increase disposable income, but high property and sales taxes may offset these benefits. Evaluate your total tax burden and lifestyle needs. Trusted financial platforms like Ultima Markets can guide you through these decisions, while Ultima Markets Deposits & Withdrawals ensures seamless financial transactions. For reviews and user experiences, check Ultima Markets Reviews.

FAQ

Q：Is living in a no-income-tax state always cheaper?

Not necessarily. High property or sales taxes in states like Texas or New Hampshire can offset income tax savings.

Q：Do I pay taxes if I live in a no-income-tax state but work for a high-tax state employer?

Rules vary by state. Some enforce a “convenience of the employer” principle. Consult a tax professional for guidance.

Q：What’s the difference between income tax and state-level capital gains tax?

Income tax applies to wages, while capital gains tax targets profits from assets. Most no-income-tax states also lack broad capital gains taxation, except for high earners in Washington.

Q：Can relocating help me save for a house?

Yes. Extra take-home pay from avoiding state income tax can be directed toward savings. For example, an extra $500/month adds $6,000 annually, which can accelerate your home purchase plan.