Top 9 Best States With No Income Tax for High Net Worth Individuals
9 States with No Income Tax
| Comparison of 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, and U.S. News & World Report “Best States to Live In” rankings
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Table of Contents
1. Alaska
Alaska does not levy a state income or sales tax; its average tax rates remain the lowest of all 50 states. Combining all property, sales, and excise taxes, the average Alaskan resident pays 5.06% of his income. Also, Alaskans receive one payment a year from the Alaska Permanent Fund Corporation. In 2023, this has been the $1,312 payment from dividends. The fund comprises income from mineral leases and royalties. In contrast, Alaska spends more on healthcare and education than any other state ($13,642 and $19,540, respectively).
2. New Hampshire
The state has no intention of taxing individual earned income but has levied a tax on dividends and interests. The taxes on the investment income are aimed to be phased out by 2027. The state has no state sales tax, but it includes alcohol tax. The average property tax in New Hampshire is at 1.86%, third ranked at the highest in the United States.
Residents in New Hampshire pay 6.14% of income tax. It ranks sixth in the U.S on the U.S. News & World Report list of “Best States to Live In” and 36th in the nation for affordability. New Hampshire’s spending ranking was also within the listed states’ ranks among the highest. The state spent among the highest in education spending (per pupil, $19,443 in 2021) and ranked 12th out of 50 in the country for health care, with the state spending a large amount like $11,793 per person in 2020.
3. Tennessee
For instance, in 2021, Tennessee abolished its Hall Income Tax, an unearned income tax on interest and dividends, considered one of the friendliest policies to retirees. Residents pay 6.22% of state taxes from their income, ranking 14th in affordability and 24th in “Best State to Live In” according to U.S. News & World Report. Tennessee is also near the bottom of the 50 states for spending on both education and healthcare.
4. Florida
Florida has always been a predominant state for the snowbird group. The citizens in Florida pay 6.33% of their state taxes from income earned. From affordability rates to the high cost of housing, Florida ranks 38th. It is also the 10th best state to live in (U.S. News and World Report). The state is lowest in spending on education but averages in spending on health care. Florida has a 5.5% corporate income tax, except LLCS, sole proprietorships, and S corporations, which are exempt from some or from all taxes.
5. Wyoming
Wyoming residents do not pay personal or corporate state income taxes, retirement income taxes, or health taxes; in addition, local sales tax is low, at 4%. The rate percentage for taxes, which includes property, sales, and excise taxes as a percentage of personal income, is 6.42%. Like Alaska, Wyoming taxes natural resources, primarily oil. The state ranks 18th in affordability and 26th on the U.S. News & World Report list of “Best States to Live In.” In 2021, Wyoming’s education spending will be in the top quarter of US states, and its healthcare spending will be relatively strong.
6. South Dakota
Like many states with no income tax, South Dakota earns revenues from a sales tax of 4.5%. Alcohol and cigarettes are taxed. Its property taxes are above average. Residents pay an effective state tax rate of 6.69% of income earned. It ranks 8th in affordability among all states and is considered the 12th “Best State,” according to U.S. News and World Report. Its spending on education is considered good, and its healthcare spending is low.
7. Nevada
Nevada has a relatively high sales tax at 4.6%, and the state imposes taxes on alcohol and gambling because of their ‘sinful’ nature, along with those imposed on the services of casinos and hotels. That’s the second-highest figure on this list (but 19th out of 50) at 7.69% of Nevadans’ income. Its high cost of living puts Nevada in the 34th position of affordability. It positions within the bottom 25% of the states in education spending and third lowest in the country in health care spending.
8. Texas
Prohibited by the state constitution, Texas jurisdiction has no personal income tax. Sales and excise taxes are the ways through which the state can accrue income from the services it offers. The sales tax percentage in some jurisdictions can be as high as 8.25% (6.25% plus a 2% use tax). Property taxes are higher than in most states, and the net tax paid on average per capita is 8.19% of personal income.
U.S. News & World Report named it No. 33 in the nation and No. 35 on the list of “Best States to Live In.” Texas ranks fourth-lowest in the nation for healthcare expenditures and spends 42nd in education.
9. Washington
Many significant employers like Washington because it lacks corporate income tax (although there is a state capital gains tax). Washington residents pay a 6.5% sales tax, with high gasoline taxes. Total tax expenditures per capita are 8.24%. The state is ranked 46th in affordability but ranks second in the best states to live in.
Its educational spending has been on the rise, but spending on healthcare falls below the nation.
What exactly does it mean to reside in a state without income tax?
One can save more of that income if they get to live in a state without income tax, thus potentially reducing their overall tax burden. So, for example, you should probably even be, at one point, the person that resides in a state that does incur high rates of income tax—per se, New York or California—and you should probably even be, at one point, moving to another place to lessen your tax burden. However, although a state may have no income tax, you will still probably pay other taxes, which can contribute to your overall tax burden.
Pros and cons of living in a state without income tax
Retirement benefits
It’s excellent for your bank account to not have your retirement benefits taxed by the state, but consider the disadvantages that might come from living in a state with no income tax. Does it have services and amenities in place that you want to be present during your retirement? Consider the cost of living as well.
Other taxes
Property taxes are considered another substantial source of revenue for both state and local governments; therefore, this is the tax of concern if residing in a state lacking income tax. Look out for high sales taxes as well.
Establishing domicile
You will want to check with a tax professional or an accountant because no one wants to pay taxes in two different states if you live in both states for part of the year. You will need to determine where you are a permanent resident.
Cost (and quality) of living
Consider the cost of living within a state that taxes your income. Perhaps those individuals you have contact with and who live in that state would be outstanding and virtuous in helping you make such a determination and weigh the potential costs and benefits of making a move such as this.
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