9 States With No Income Tax for High Net Worth Individuals
9 States with No Income Tax
Comparison of States with No Income Tax
Below is a comparison of nine U.S. states that do not levy personal income tax. While income tax is eliminated, overall tax burden and quality of life still vary significantly by state.
| 9 States with No Income Tax | ||||
| No-Tax State | Total Tax Burden (% of income) | Total Tax Burden Rank (1=lowest) | Affordability (1=best) | Best State to Live in (1=best) |
| Alaska | 5.06% | 1 | 40 | 49 |
| New Hampshire | 6.14% | 3 | 36 | 6 |
| Tennessee | 6.22% | 4 | 14 | 24 |
| Florida | 6.33% | 5 | 38 | 10 |
| Wyoming | 6.42% | 6 | 18 | 26 |
| South Dakota | 6.69% | 7 | 8 | 12 |
| Nevada | 7.69% | 19 | 34 | 38 |
| Texas | 8.01% | 22 | 33 | 35 |
| Washington | 8.24% | 26 | 46 | 2 |
Sources: WalletHub – Tax Burden by State; U.S. News & World Report – Affordability & Best States Rankings
Table of Contents
1. Alaska
Alaska is one of the few states with no state income tax and no statewide sales tax, making it attractive to individuals seeking to reduce their overall tax burden. On average, Alaskans pay just 5.06% of their income when combining property, sales, and excise taxes—among the lowest in the nation. Additionally, residents benefit from the Alaska Permanent Fund, which distributes annual dividends derived from mineral lease revenues. In 2023, the dividend payment amounted to $1,312. While offering low taxes, Alaska also maintains some of the highest per capita expenditures on healthcare and education, at $13,642 and $19,540 respectively.
2. New Hampshire
New Hampshire does not tax earned income, though it currently levies a tax on dividends and interest income—scheduled to be phased out entirely by 2027. The state also does not impose a general sales tax, although certain goods like alcohol are taxed. Property taxes, however, are among the highest in the nation, with an average rate of 1.86%.
Residents in New Hampshire pay approximately 6.14% of their income in combined state and local taxes. The state ranks sixth on U.S. News & World Report’s list of “Best States to Live In” and 36th for affordability. In terms of public spending, New Hampshire allocates significant funds toward education—$19,443 per student as of 2021—and ranks 12th nationwide for healthcare, spending around $11,793 per person in 2020.
3. Tennessee
Tennessee eliminated its Hall Income Tax on interest and dividends in 2021, making it one of the more favorable states for individuals seeking to avoid taxes on unearned income—particularly retirees. The state does not impose a personal income tax, and residents pay about 6.22% of their income in combined state and local taxes.
Tennessee ranks 14th in affordability and 24th on U.S. News & World Report’s “Best States to Live In” list. However, the state is positioned near the lower end nationally in spending on education and healthcare, which may be a consideration for individuals evaluating long-term residency factors.
4. Florida
Florida remains a popular destination for part-time residents and retirees, often referred to as “snowbirds,” due to its lack of state income tax. Residents contribute approximately 6.33% of their income in overall state and local taxes.
While Florida ranks 10th on U.S. News & World Report’s “Best States to Live In,” it places 38th in affordability, driven in part by rising housing costs. The state ranks low in education spending but maintains an average level of healthcare expenditure. Florida imposes a 5.5% corporate income tax, though certain business structures—such as LLCs, sole proprietorships, and S corporations—may be partially or fully exempt depending on how they are organized.
5. Wyoming
Wyoming does not levy personal or corporate state income taxes, nor does it tax retirement income. Local sales tax is relatively low, averaging around 4%. When combining property, sales, and excise taxes, residents contribute approximately 6.42% of their personal income toward state and local taxes.
Wyoming funds much of its budget through taxes on natural resources, particularly oil and gas. The state ranks 18th in affordability and 26th in U.S. News & World Report’s “Best States to Live In.” In 2021, Wyoming ranked in the top quartile nationally for education spending and maintained relatively strong per capita healthcare expenditures.
6. South Dakota
South Dakota does not impose a state income tax, instead generating revenue primarily through a 4.5% sales tax. The state also applies excise taxes on alcohol and tobacco products. Property taxes in South Dakota tend to be slightly above the national average. Residents contribute approximately 6.69% of their income through various state and local taxes.
South Dakota ranks 8th in affordability and is listed as the 12th “Best State to Live In” by U.S. News & World Report. The state maintains solid investment in education, while healthcare spending remains relatively low compared to national benchmarks.
7. Nevada
Nevada does not levy a state income tax but compensates with a relatively high sales tax of 4.6%. Additional revenue is generated through excise taxes on alcohol and gambling, as well as taxes on hospitality services, including casinos and hotels. The effective state and local tax burden amounts to approximately 7.69% of income—second highest among states with no income tax and 19th overall.
Due to its elevated cost of living, Nevada ranks 34th in affordability. The state also falls within the bottom quartile for education spending and ranks among the lowest in the nation for healthcare expenditures.
8. Texas
Texas does not levy a personal income tax, as prohibited by the state constitution. Instead, the state relies heavily on sales and excise taxes to generate revenue. Combined state and local sales tax rates can reach up to 8.25% (a base of 6.25% plus up to 2% in local use taxes). However, Texas has relatively high property taxes, resulting in an average effective tax burden of 8.19% of personal income.
According to U.S. News & World Report, Texas ranks 33rd for affordability and 35th overall in its “Best States to Live In” list. The state ranks among the lowest in healthcare spending—fourth from the bottom—and places 42nd in education funding.
9. Washington
Washington attracts major employers partly due to its lack of corporate income tax, though it does impose a state capital gains tax. Residents pay a state sales tax of 6.5%, and the state also levies one of the highest gasoline taxes in the country. Overall, Washingtonians pay approximately 8.24% of their income in state and local taxes.
While Washington ranks low in affordability (46th), U.S. News & World Report places it as the second-best state to live in. The state has made progress in increasing education spending, though its healthcare expenditure remains below the national average.
What exactly does it mean to reside in a state without income tax?
Living in a state with no income tax means you can retain more of your earnings, potentially lowering your overall tax burden. For example, if you currently live in a state with high income tax—such as New York or California—you might consider relocating to reduce that financial strain. However, it’s important to remember that even in states without income tax, other taxes such as sales, property, and excise taxes still apply. These can significantly influence your total tax obligations and should be considered when evaluating overall cost of living.
Pros and Cons of Living in a State Without Income Tax
Retirement benefits
Not having your retirement benefits taxed at the state level can be a major financial advantage. However, it’s important to weigh that against potential trade-offs. Does the state provide the level of services, infrastructure, and quality-of-life amenities you want during retirement? Be sure to assess whether those benefits outweigh any savings.
Other Taxes
While income taxes may be absent, states must generate revenue elsewhere. That often translates to higher property or sales taxes. For individuals in states without income tax, property taxes are often a primary source of government funding, and sales taxes can add up quickly depending on your spending habits.
Establishing Domicile
If you spend time in more than one state, it’s essential to establish legal residency (domicile) in the one where you’ll receive the most tax benefit. Consult a tax advisor or financial professional to avoid double taxation and ensure compliance with residency laws.
Cost (and Quality) of Living
The cost of living varies widely by state. A no-income-tax state may still be expensive in terms of housing, healthcare, or other daily needs. Before making a move, consider what kind of lifestyle the state can support—both financially and in terms of your personal preferences.
If you’re considering how tax-friendly states fit into your overall wealth strategy, explore additional options for investment and retirement planning that align with your goals: