States with No Income Tax Pros and Cons: The Complete 2024 Guide

Atomic Answer: Living in a state](/articles/state-estate-and-inheritance-taxes-a-complete-guide-to-prote-1780894864118)](/articles/state-estate-and-inheritance-taxes-a-complete-guide-for-2025-1780891596689)](/articles/state-income-tax-on-remote-workers-complete-guide-for-2025-1780905549072)](/articles/state-estate-and-inheritance-tax-the-complete-guide-1780906340760)](/articles/moving-to-lower-tax-state-guide-the-complete-guide-to-slashi-1780906331715) with no income tax—currently Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—can save you thousands annually, but the trade-offs are real. These states rely on higher sales taxes, property taxes, or other fees to fund services. For example, Texas has no income tax but an average property tax rate of 1.74% (nearly double the national average), while Florida's sales tax is 6% (plus local add-ons). Your net savings depend on your income level, spending habits, and lifestyle. A family earning $150,000 might save $6,000–$10,000 annually in income taxes but pay $3,000–$5,000 more in property taxes and sales tax—a net gain of $1,000–$7,000. However, service quality (schools, infrastructure) can vary, and moving costs must be factored in. This guide breaks down every pro and con with real data, case studies, and actionable steps so you can decide if relocation is right for you.

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Table of Contents

1. What Are the 9 States with No Income Tax in 2024?
2. How Much Money Can You Actually Save in a No-Income-Tax State?
3. What Are the Hidden Costs of Living in a No-Income-Tax State?
4. How Do No-Income-Tax States Fund Public Services?
5. Which No-Income-Tax State Is Best for Retirees vs. Remote Workers?
6. Complete Guide: How to Calculate Your Net Savings Before Moving
7. Key Takeaways
8. Frequently Asked Questions

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What Are the 9 States with No Income Tax in 2024?

As of 2024, nine states impose no state-level individual income tax on wages, salaries, or most investment income. This means no withholding from your paycheck and no annual state tax filing for earned income. However, nuances exist—New Hampshire doesn't tax wages but does tax interest and dividends (4% as of 2024, phasing out by 2027), and Washington has a 7% capital gains tax on gains exceeding $250,000.

The 9 States:

• Alaska – No income tax; pays residents annual oil revenue dividends (~$1,300 in 2023)
• Florida – No income tax; 6% state sales tax (local add-ons up to 2.5%)
• Nevada – No income tax; 6.85% state sales tax (local add-ons up to 1.53%)
• New Hampshire – No wage tax; 4% tax on interest/dividends (phasing out)
• South Dakota – No income tax; 4.5% state sales tax (local add-ons up to 2%)
• Tennessee – No income tax; 7% state sales tax (highest in nation, plus local up to 2.75%)
• Texas – No income tax; 6.25% state sales tax (local add-ons up to 2%)
• Washington – No income tax; 6.5% state sales tax (local add-ons up to 4.1%); 7% capital gains tax
• Wyoming – No income tax; 4% state sales tax (local add-ons up to 2%)

Key Insight: These states are not tax-free—they simply shift the tax burden. The Tax Foundation's 2024 State Business Tax Climate Index ranks these states 1st–9th for tax friendliness, but the cost of living varies wildly. For instance, Washington's overall tax burden is 8.9% of income (including sales and property taxes), while Texas is 8.3% and Florida is 8.1%—compared to high-tax states like New York (12.7%) or California (11.5%).

Actionable Steps:

1. Check your current state's income tax rate and calculate what you'd save.
2. Visit each state's Department of Revenue website for current sales and property tax rates.
3. Use SmartAsset's cost-of-living calculator to compare your current city to potential new cities.

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How Much Money Can You Actually Save in a No-Income-Tax State?

The savings depend entirely on your income bracket and spending patterns. Let's use real data from the IRS and Bureau of Labor Statistics.

Table 1: Annual Income Tax Savings by Income Level (Single Filer, 2024)

Annual Income	High-Tax State (California, 9.3% marginal)	No-Income-Tax State (Texas)	Annual Savings
$50,000	$2,380 (effective rate 4.76%)	$0	$2,380
$100,000	$5,830 (effective rate 5.83%)	$0	$5,830
$150,000	$9,750 (effective rate 6.50%)	$0	$9,750
$250,000	$18,250 (effective rate 7.30%)	$0	$18,250
$500,000	$42,500 (effective rate 8.50%)	$0	$42,500
$1,000,000	$93,000 (effective rate 9.30%)	$0	$93,000

Source: IRS 2023 tax tables; California Franchise Tax Board 2024 rates. Effective rates include standard deduction](/articles/health-insurance-deduction-se-complete-guide-for-self-employ-1780891765751).

But wait—you must subtract higher costs. For a family earning $150,000 in Texas:

• Property tax increase: Average Texas home value $350,000 × 1.74% = $6,090/year vs. California's 0.77% = $2,695/year → +$3,395
• Sales tax increase: Texas 8.25% (state + local average) vs. California 7.25% → assumes $50,000 taxable spending → +$500
• Net savings: $9,750 - $3,395 - $500 = $5,855

Case Study: The Martinez Family Relocation Background: The Martinez family (two earners, two children) moved from San Jose, California (annual income $220,000) to Austin, Texas in 2023.

• California taxes: $18,700 state income tax, $4,200 property tax (home value $550,000), $4,000 sales tax → total $26,900
• Texas taxes: $0 income tax, $7,830 property tax (home value $450,000), $4,500 sales tax → total $12,330
• Net tax savings: $14,570
• Other costs: Higher homeowner's insurance in Texas (+$1,200/year), lower gas prices (−$600/year)
• Outcome: The Martinez family saves approximately $14,000 annually after accounting for all tax differences. They report higher satisfaction with no state tax filing, but note that Austin's property taxes have risen 8% in 2024.

Actionable Steps:

1. Calculate your effective state income tax rate using your current state's tax brackets.
2. Estimate your new property tax using Zillow median home values in target cities.
3. Factor in sales tax using the Tax Foundation's state-by-state sales tax map.

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What Are the Hidden Costs of Living in a No-Income-Tax State?

Beyond sales and property taxes, several hidden costs can erode your savings:

1. Higher Property Taxes (The Biggest Trade-off)

• Texas: Effective property tax rate 1.74% (nation's 7th highest)
• Florida: 0.91% (below national average of 0.99%)
• Nevada: 0.55% (low)
• Washington: 0.93% (average)
• New Hampshire: 1.89% (4th highest in nation) Source: Tax Foundation 2024 Property Tax Rates

2. Higher Sales Taxes and "Sin Taxes"

• Tennessee: 9.55% average combined rate (highest in US)
• Washington: 9.38% average (2nd highest)
• Nevada: 8.23% average
• Florida: 7.02% average Source: Tax Foundation 2024 Sales Tax Rates

3. Vehicle Registration and Personal Property Taxes

• Texas: Vehicle registration averages $60–$90/year, plus 6.25% sales tax on vehicle purchases
• Virginia (comparison): $40/year registration plus personal property tax (4.15% of car value annually)
• Washington: Vehicle excise tax (0.3% of value annually) plus registration fees

4. Higher Insurance Costs

• Florida: Homeowner's insurance averages $3,600/year (highest in US due to hurricane risk)
• Texas: $2,300/year (3rd highest)
• National average: $1,700/year Source: Insurance Information Institute 2024

5. Tourism-Driven Inflation

• Florida, Nevada, Tennessee: Tourist-heavy economies inflate costs for groceries, dining, and services by 5–15% in major cities

Table 2: Hidden Cost Comparison (Family of 4, $150,000 Income)

Cost Category	Texas (Austin)	Florida (Orlando)	Washington (Seattle)	New York (comparison)
State Income Tax	$0	$0	$0	$6,870
Property Tax	$6,090	$3,185	$3,255	$4,200
Sales Tax (on $50k spending)	$4,125	$3,510	$4,690	$4,450
Vehicle Registration	$90	$225	$180	$110
Homeowner's Insurance	$2,300	$3,600	$1,200	$1,500
Total Tax/Insurance Cost	$12,605	$10,520	$9,325	$17,130

Note: New York has income tax but lower property and insurance costs. Net savings in no-income-tax states range from $4,525 (Texas) to $7,805 (Washington) vs. New York.

Actionable Steps:

1. Get insurance quotes from 3 providers for your current home and target home.
2. Calculate vehicle registration fees using each state's DMV website.
3. Visit Numbeo.com to compare cost of living indices for groceries, utilities, and rent.

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How Do No-Income-Tax States Fund Public Services?

This is a critical consideration. Without income tax revenue, states must generate income elsewhere. Here's how they compare:

Revenue Sources (as % of total state tax revenue, 2023 data):

State	Sales Tax %	Property Tax %	Corporate Tax %	Other Fees %
Texas	58%	0% (local only)	0%	42% (fees, severance taxes)
Florida	75%	0% (local only)	5%	20%
Nevada	35%	0% (local only)	0%	65% (gaming taxes, fees)
Washington	60%	0% (local only)	0%	40% (B&O tax, fees)
Tennessee	70%	0% (local only)	5%	25%
New Hampshire	0%	65% (state + local)	8%	27%

Source: Tax Foundation, State Revenue Reports 2024

Impact on Services:

• Education: Texas ranks 38th in per-pupil spending ($10,700 vs. national average $13,500). Florida ranks 43rd.
• Infrastructure: Texas has 10% of structurally deficient bridges (above national average). Washington ranks 12th in infrastructure quality.
• Healthcare: Medicaid expansion varies—Texas and Florida have not expanded, leaving 1.2 million and 800,000 residents uninsured respectively.
• Property Taxes: Local property taxes fund schools heavily in Texas and New Hampshire, creating disparities between wealthy and poor districts.

Case Study: The Johnson Family's Education Decision Background: The Johnsons moved from Massachusetts (ranked 3rd in education) to Texas (ranked 38th) in 2022 to save $18,000/year in taxes.

• Tax savings: $18,000
• Private school cost: $14,000/year for two children (average Texas private school tuition)
• Net benefit: $4,000
• Outcome: The Johnsons found that their local public school, while underfunded, had excellent teachers and a strong PTA. They chose public school and invested the $14,000 in 529 plans for college. However, they note that special education services are significantly better in Massachusetts.

Actionable Steps:

1. Research school district ratings using GreatSchools.org or Niche.com.
2. Check your target state's Medicaid expansion status and healthcare rankings.
3. Review state infrastructure grades from the American Society of Civil Engineers.

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Which No-Income-Tax State Is Best for Retirees vs. Remote Workers?

For Retirees: Best Options

• Florida: No income tax, no estate tax, no inheritance tax. Social Security benefits are not taxed. Average property tax rate 0.91%. However, homeowner's insurance is costly.
• Nevada: No income tax, no estate tax, low property taxes (0.55%). Medicare acceptance rates are high. However, healthcare quality ranks 37th nationally.
• Tennessee: No income tax, no estate tax. Social Security and pension income are tax-free. However, sales tax is highest in nation (9.55% average).

For Remote Workers: Best Options

• Texas: No income tax, fast internet (3rd in US), affordable housing in suburbs. Major tech hubs in Austin, Dallas, Houston.
• Washington: No income tax, excellent internet (2nd in US), strong tech job market. However, cost of living in Seattle is 50% above national average.
• South Dakota: No income tax, low cost of living (10% below national average), but limited job opportunities and harsh winters.

Table 3: Best No-Income-Tax States by Lifestyle

Lifestyle Priority	Best State	Why	Key Trade-off
Retiree (low taxes)	Florida	No tax on Social Security, low property tax	High insurance, hurricane risk
Retiree (healthcare)	New Hampshire	No wage tax, top 10 healthcare	High property tax (1.89%)
Remote Worker (tech)	Washington	No income tax, strong internet	High cost of living, capital gains tax
Remote Worker (affordable)	Texas	No income tax, low housing	High property tax, hot summers
Entrepreneur (low regulation)	Nevada	No corporate income tax, no franchise tax	Gaming-dependent economy
Family (education)	New Hampshire	Top 10 schools, no wage tax	Highest property tax in nation

Actionable Steps:

1. Retirees: Use the AARP state tax calculator to compare your retirement income.
2. Remote workers: Check internet speeds using BroadbandNow's state rankings.
3. Use the Tax Foundation's "Where to Live for Maximum Tax Savings" tool.

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Complete Guide: How to Calculate Your Net Savings Before Moving

Step 1: Calculate Your Current State Income Tax

• Find your state's tax brackets (e.g., California 1%–13.3%, New York 4%–10.9%).
• Use your 2023 federal return to find your state taxable income.
• Multiply by your effective rate (total tax ÷ taxable income).

Step 2: Estimate New Property Tax

• Find median home price in target city (Zillow, Redfin).
• Multiply by local property tax rate (county assessor's office).
• Include potential homestead exemption (Texas: $40,000–$100,000 for homeowners).

Step 3: Estimate New Sales Tax

• Estimate annual taxable spending (groceries, clothing, electronics, dining out).
• Multiply by combined state + local sales tax rate.
• Note: Some states exempt groceries (Texas, Florida) or prescription drugs.

Step 4: Factor in Other Costs

• Vehicle registration (state DMV websites)
• Homeowner's insurance (3 quotes)
• Utility costs (Energy Information Administration state averages)
• Moving costs (average $5,000–$15,000 for cross-country move)

Step 5: Calculate Net Savings

• Total current taxes – Total new taxes = Gross savings
• Gross savings – Other cost increases = Net savings
• Divide by moving costs to find breakeven point (years to recoup)

Example Calculation:

• Current: New York City, $200,000 income, $600,000 home
  • State + city income tax: $14,500
  • Property tax: $6,000 (1.0%)
  • Sales tax: $3,500 (8.875%)
  • Total: $24,000
• Target: Austin, Texas, same income, $500,000 home
  • Income tax: $0
  • Property tax: $8,700 (1.74%)
  • Sales tax: $2,800 (6.25% on $45k taxable spending)
  • Total: $11,500
• Net savings: $12,500/year
• Moving costs: $10,000
• Breakeven: 0.8 years (10 months)

Actionable Steps:

1. Download your current state tax return to find exact numbers.
2. Use Zillow's property tax estimator for target homes.
3. Create a spreadsheet with all cost categories before making a decision.

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Key Takeaways

• The 9 no-income-tax states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—each with unique trade-offs.
• Average annual savings range from $2,380 (for $50k income) to $93,000 (for $1M income), but offset by higher property taxes ($3,000–$6,000) and sales taxes ($500–$2,000).
• Hidden costs include higher insurance (Florida: $3,600/year), vehicle registration fees, and tourism-driven inflation.
• Service quality varies—Texas ranks 38th in education spending, Florida 43rd, while New Hampshire ranks 7th.
• Retirees benefit most in Florida (no tax on Social Security, low property tax) and Tennessee (no tax on pensions).
• Remote workers should prioritize Washington (fast internet, tech hub) or Texas (affordable, no income tax).
• Always calculate net savings using property tax, sales tax, insurance, and moving costs—don't just focus on income tax savings.
• Moving costs average $5,000–$15,000, with breakeven typically within 1–3 years for households earning over $100,000.

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Frequently Asked Questions

1. Do states with no income tax still tax retirement income? It depends. Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not tax any retirement income (Social Security, pensions, 401(k) withdrawals). New Hampshire doesn't tax wages but taxes interest and dividends (4%, phasing out by 2027). Tennessee taxes only interest and dividends (1%, phasing out). Always check current law—Social Security is tax-free in all no-income-tax states except New Hampshire (where it's exempt from wage tax but subject to interest/dividend tax if applicable).

2. How do no-income-tax states fund schools without income tax? Primarily through local property taxes and state sales taxes. Texas funds schools through a "Robin Hood" system where wealthy districts share property tax revenue. Florida uses a combination of sales tax (75% of state revenue) and property taxes. New Hampshire relies heavily on property taxes (65% of state revenue), leading to significant disparities between rich and poor districts. Per-pupil spending in these states averages 10–20% below the national median.

3. Is it worth moving to a no-income-tax state for a $75,000 salary? For $75,000, you'd save approximately $3,000–$4,500 in state income tax annually. However, moving costs ($5,000–$10,000) mean a 2–3 year breakeven. If property taxes increase by $2,000+ and sales tax by $500, net savings may be only $500–$2,000/year. It's worth it if you plan to stay 5+ years, but for short-term moves, the savings may not justify the hassle. Consider remote work opportunities that allow you to keep your current job while relocating.

4. Which no-income-tax state has the lowest overall tax burden? According to the Tax Foundation's 2024 State-Local Tax Burden report, Alaska has the lowest overall tax burden (4.6% of income), followed by Nevada (7.8%), Florida (8.1%), and Texas (8.3%). However, Alaska's unique oil revenue dividends ($1,300/resident in 2023) offset some costs. For retirees, Florida often has the lowest effective tax burden due to exemptions on Social Security and pensions.

5. Do I have to pay state income tax if I work remotely for a company in a no-income-tax state? No—state income tax is based on where you physically work, not where your employer is located. If you live in California but work remotely for a Texas company, you owe California state income tax. The exception is if you establish residency in a no-income-tax state (e.g., move to Texas, get a Texas driver's license, register to vote, and spend more than 183 days there). Be careful—some states (New York, California) aggressively audit remote workers who claim residency elsewhere.

6. How do no-income-tax states handle capital gains taxes? Most no-income-tax states do not tax capital gains (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Wyoming). However, Washington imposes a 7% tax on capital gains exceeding $250,000 (single) or $500,000 (married) as of 2024. New Hampshire taxes interest and dividends (4%) but not capital gains from asset sales. This makes no-income-tax states attractive for investors, but high earners should avoid Washington if they have significant capital gains.

7. What are the worst hidden costs in no-income-tax states that people overlook? The top three hidden costs are: (1) Homeowner's insurance—Florida averages $3,600/year (double national average), Texas $2,300/year; (2) Vehicle registration and taxes—Washington charges 0.3% of vehicle value annually plus sales tax on purchase; (3) Tourism-driven inflation—Florida, Nevada, and Tennessee have 5–15% higher costs for dining, groceries, and services due to tourist demand. Additionally, some states (Texas, Florida) have higher utility costs due to extreme weather (air conditioning in summer, heating in winter).

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This article is for educational purposes only and should not be considered tax or legal advice. Tax laws change frequently and vary by individual circumstances. Consult a licensed CPA or tax attorney before making relocation decisions. Data sourced from the Tax Foundation (2024), IRS, Bureau of Labor Statistics, and state revenue departments as of October 2024.

For more tax optimization strategies, read our guides on tax-efficient investing, state-by-state retirement tax comparison, and how to minimize capital gains taxes.