States with no income tax or the lowest income tax rates

Nine states have no state income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. New Hampshire is a partial exception—it taxes interest and dividend income but not wages. If you earn most of your money from a job, New Hampshire functions like a no-income-tax state for you.

Among states that do tax income, the lowest rates cluster in the South and Mountain West. Louisiana, Mississippi, and Arkansas have top marginal income tax rates between 4.25% and 5.75%. Montana, North Dakota, and Pennsylvania also stay below 6%. These rates explore to the highest earners in each state; lower earners pay less. The actual tax you owe depends on your income bracket, not just the top rate.

Income tax is only one piece of your total state tax burden. A state with no income tax might make up the difference with high sales or property taxes. Alaska, for instance, has no state income tax but also no statewide sales tax—a genuine advantage. Texas has no income tax but a 6.25% state sales tax plus local additions that can push the total above 8%. You need to look at all three categories together.

Key Takeaways

  • Nine states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire—have no state income tax on wages.
  • States with no income tax often compensate with higher sales taxes or property taxes, so the total burden depends on how you spend and own property.
  • Louisiana, Mississippi, Arkansas, Montana, North Dakota, and Pennsylvania have the lowest income tax rates among states that do tax income.
  • Your actual tax bill depends on your income level, where you live within the state, and whether you own property or rent.
  • Moving to a low-tax state saves money only if you understand the full picture: income, sales, and property taxes combined.

Sales tax rates across low-tax states

Sales tax varies widely even among low-income-tax states. Alaska has no state sales tax at all, making it the lowest in the nation for consumption. Florida, Nevada, South Dakota, Tennessee, Texas, and Washington all have state sales taxes between 5.75% and 7.25%, but local jurisdictions add on top of that. In Texas, for example, the state rate is 6.25%, but Houston's combined rate reaches 8.25% because of city and county additions.

Wyoming and New Hampshire have no state sales tax, though New Hampshire does tax prepared food and lodging. This matters if you eat out frequently or travel for work. The total sales tax you actually pay depends on your city and county, not just the state rate. Two people in the same state can pay different sales taxes based on where they shop.

States with income tax sometimes have lower sales taxes to balance the load. Pennsylvania has a 6% state income tax but only a 6% state sales tax with minimal local additions. Montana has no sales tax at all, which is rare—it funds state services through income tax instead. If you spend more than you earn (common in retirement), low sales tax matters more than low income tax.

Property tax rates and what they mean for homeowners

Property tax is where the real variation emerges. States with no income tax often rely heavily on property tax to fund schools and local services. New Jersey, Illinois, and Connecticut have the highest effective property tax rates in the nation, all above 2% of home value annually. But these are high-income-tax states too, so they are not relevant to your search.

Among low-income-tax states, Hawaii and Louisiana have the lowest property tax rates, below 0.3% of home value. This means on a $300,000 home, you would pay under $900 per year in property tax. Alaska, South Dakota, and Wyoming fall in the 0.8% to 1.2% range. Texas and Florida, despite no income tax, charge property taxes between 1.6% and 1.8%—higher than many income-tax states.

Property tax is calculated on assessed value, which varies by county and changes over time. A home worth $300,000 in one county might be assessed at $250,000 in another, lowering your bill. If you plan to buy property, research the specific county's assessment practices, not just the state rate. Homestead exemptions—which reduce assessed value for primary residences—exist in many low-tax states and can cut your bill significantly.

Combined tax burden: the real comparison

No single tax tells the whole story. A person earning $75,000 and owning a $350,000 home pays different total taxes in each state. In Texas, you pay no income tax but roughly $5,600 in property tax and $1,200 in sales tax on $20,000 in annual spending. In Pennsylvania, you pay $4,500 in income tax, $360 in property tax, and $1,200 in sales tax—a lower total despite the income tax.

The Tax Foundation publishes state tax burden rankings that combine all three categories, but these are averages. Your personal burden depends on your income level, home value, and spending habits. A retiree living on investment income benefits most from no income tax. A renter with a modest income benefits from low sales tax. A homeowner benefits from low property tax. There is no single "lowest tax state" for everyone.

If you are considering a move, calculate your own taxes in the states you are considering. Most state revenue departments publish tax calculators online. Enter your actual income, home value, and expected spending to see what you would owe. This takes 20 minutes and beats guessing based on headlines.

States to avoid if low taxes are your goal

California, New York, New Jersey, and Vermont have the highest combined state tax burdens. California's top income tax rate is 13.3%, the highest in the nation. New York's top rate is 10.9%. New Jersey has no state sales tax but compensates with a 10.75% top income tax rate and property taxes above 2%. Vermont's top rate is 8.75% plus a 6% sales tax.

These states fund extensive social services and education systems with high taxes. If low taxes are your priority, these four are the opposite direction. However, they also have strong job markets and established infrastructure, so the decision involves more than taxes alone.

How to research your specific situation

Start with your state's Department of Revenue website. Most states have tax calculators that estimate your bill based on income, filing status, and deductions. Enter your actual numbers, not estimates. Then repeat the process for any state you are considering moving to. The difference is your potential savings or cost.

For property tax, visit the county assessor's website in the specific county where you would live. Property tax rates vary by county, sometimes dramatically. A home in one county might be assessed at 80% of market value while another county assesses at 100%. The assessor's office can tell you the effective rate and any exemptions you might may have access to for.

For sales tax, check the state revenue department's rate tables. These show the state rate plus the average local rate. If you are moving to a specific city, the city's tax assessor or finance department can give you the exact combined rate for that address. This level of detail matters when you are making a major decision.

Tax incentives and credits that lower your bill

Many low-tax states offer additional credits that reduce what you owe. Louisiana offers a Restoration Tax Abatement for businesses relocating to the state. Mississippi offers a Homestead Property Tax Exemption that can reduce assessed value by up to $7,500 for primary residences. Texas offers a Property Tax Exemption for disabled veterans and surviving spouses.

These incentives are state-specific and often have income limits or other restrictions. If you are retired, disabled, or moving a business, research whether your state offers credits. Your state's Department of Revenue website lists all available credits with may be able to access requirements. Some require you to file a separate form; others are automatic if you meet the criteria.

Do not assume you may have access to for a credit just because you live in a low-tax state. Read the may be able to access rules carefully. Many credits phase out at higher income levels, so a high earner might not benefit from a credit designed for middle-income residents.

Frequently Asked Questions

If I move to a no-income-tax state, will I save money on taxes?

Not necessarily. You might pay more in property tax or sales tax. Calculate your total tax bill in both your current state and the state you are considering, using your actual income, home value, and spending. The difference is your real savings or cost. A move saves money only if your total state tax bill drops.

Do I have to move to a state to benefit from its low taxes?

No. You only pay state income tax on income earned in that state or on income from property you own there. If you work remotely for a company in a high-tax state but live in a low-tax state, you typically pay the low-tax state's rate. However, some states tax residents on all income regardless of where it is earned. Check your current state's rules before assuming you can escape its taxes by moving.

Which state is best for retirees on a fixed income?

States with no income tax are usually best for retirees, because Social Security and pension income are not taxed. Florida, Texas, and South Dakota are popular choices. However, check property tax rates in the specific county where you plan to live. Some retirees find that high property taxes offset the income tax savings. Hawaii and Louisiana have low property taxes, which helps retirees who own homes.

Can I reduce my taxes by claiming a homestead exemption?

Yes, if you own a primary residence in a state that offers one. Homestead exemptions reduce the assessed value of your home, lowering property tax. Most states that offer them require you to file a form with the county assessor's office. The exemption amount varies by state—some reduce assessed value by a fixed dollar amount, others by a percentage. Contact your county assessor to learn what you may have access to for.

What if I own property in multiple states?

You pay property tax to each state where you own real estate, based on that state's rate and assessment practices. You pay income tax to the state where you earn income or where you are a resident. If you own a vacation home in a low-tax state but live and work in a high-tax state, you pay both states' taxes on their respective portions. Consult a tax professional if you own property in multiple states, because the rules are complex.