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Alaska has no sales tax, an average local tax rate of 1.82%, and an effective property tax rate of 1.07%. The state ranks 35th in affordability, 36th in cost of living, and 30th in housing affordability. Wyoming has a relatively low average combined state and local sales tax rate of 5.44 percent.

Florida generates most of its revenue from property taxes, highway tolls and state university tuition. Living in a state without income tax might allow you to hold on to more of your hard-earned money. However, it won’t necessarily shield you from other taxes or a higher cost of living.

In some cases, states will impose higher sales taxes or higher property taxes, such as taxes on a person’s home value. Or they may rely on cities and counties to impose those taxes to pay for services. For example, Tennessee has no state income tax, but it has one of the highest combined state and local sales tax rates – 9.548% – of any state. The average combined state and local sales tax rate is 6.11 percent. Low-income adults who are 65 and older may be eligible for an annual refund of state and property taxes, and there are a few other property tax relief programs for older adults.

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If you live in a state without personal income tax, you generally get to skip paying state taxes on retirement income. Prior to 2025, New Hampshire taxed dividends and interest on investment income at a 3% rate. The Granite State also doesn’t impose sales taxes, but it does levy excise taxes on goods such as tobacco.

Florida

Nevada has a 6.85% sales tax, an average local tax rate of 1.39%, and an effective property tax rate of 0.44%. The state ranks 33rd in affordability, 28th in cost of living, and 39th in housing affordability. Florida has a 6% sales tax, an average local tax rate of 1%, and an effective property tax rate of 0.71%.

For example, you may want to move to a state such as Texas to avoid paying income taxes, but you will need to be prepared to pay more for health care. In general, Texas has some of the lowest government spending on health care or public transportation. The effective property tax rate on owner-occupied housing in Florida is 0.71 percent. Homeowners can apply for the state’s homestead exemption to decrease their property’s taxable value by as much as $50,000. Most people can expect to pay at least some taxes during retirement, whether on 401(k) distributions or pensions.

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Some or all of the offers that appear on this page are from third party advertisers from which FinanceBuzz receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). There are both benefits and drawbacks to living in states that don’t impose a state income tax. Moving to a state with no income tax can be enticing if you want to keep more of your annual income. Of course, you must consider this move carefully, as certain things may be more expensive in the state you’re moving to, and you may have less access to job opportunities.

Typically, higher-income earners and retirees can stand to save, Featherngill says. She’s also seen clients consider timing a move to a lower-tax state with a major financial event, such as selling a business or an asset. But while moving to one of these tax-friendly states might seem like the ultimate way to reduce your expenses, you might not always save money in the tax free states in us long run. Income-tax-free Texas and Florida were the two most popular states where Americans moved in 2023, according to the most recent data on state migration patterns by the U.S. Some 7.6 million people, or more than 2% of the U.S. population, moved in total. Having residency in two different states can mean paying taxes in both places.

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You could be considered a permanent resident of one state and a “statutory resident” of the other. This means you could end up paying taxes on earned income in both states. Tax planning with a professional, such as a financial advisor, is one of the best ways to avoid finding yourself in a sticky tax situation. This southern state is a popular retreat for vacationers and retirees alike.

Pros and cons of no state income tax

• It has no income tax and is one of five states with no sales tax.
• FinanceBuzz does not provide credit cards or any other financial products.
• Tennessee does not have an income tax, but it has one of the highest sales tax rates in the nation.
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• South Dakota takes a hit here from having a very low quality of life rank.

In addition, states conduct residency audits, so this will require proof. The country music hub scores relatively high marks in terms of overall affordability, with the U.S. However, according to the Tax Foundation, an area where the state falls short is sales tax, having the second-highest in the nation. Tennessee charges tax on items such as alcohol, beer, fuel and even fantasy sports contests.

• Taking a step back from taxes, a broader measure of affordability is overall cost of living.
• Nevertheless, Texas remains a relatively affordable state due to its lower housing and grocery costs.
• That gives the “Live Free or Die” state the fourth-highest property tax rate in the country.
• Multistate returns aren’t supported, however, and professional support is limited.

Sometimes, states with no income taxes do not have the best public services. If you’re trying to determine whether moving to a state with no income tax is financially worth it, start by taking a look at your most recent tax return. Calculate how much you paid in state income taxes (some states have a flat rate, while others have a graduated rate) and determine your effective income tax rate. Then, compare that total with what you would be paying in the state where you wish to move. That said, its effective property tax rate is a relatively low 0.76 percent, and homeowners 61 and older may qualify for a reduction in property taxes if they meet certain income requirements.

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While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. Texas doesn’t have an income tax, but it does levy a state sales tax of 6.25 percent. Local jurisdictions can levy up to 1.95 percent in additional taxes, for a combined rate of 8.2 percent. New Hampshire doesn’t tax wage income and it has no sales tax.

She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies. AARP is a nonprofit, nonpartisan organization that empowers people to choose how they live as they age. Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date. Straightforward and free, Cash App Taxes allows you to file state and federal returns with access to nearly every IRS form and schedule. Multistate returns aren’t supported, however, and professional support is limited.

Remote work has made it easier than ever to envision moving without risking job security. But if you were to live in a state with limited opportunities in your industry and lose your job, you could face difficulties securing another one. Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved or otherwise endorsed by these entities. Discover will match all the cash back you’ve earned at the end of your first year.

Texas compensates for its lack of income tax revenue with a higher sales tax. The average combined state and local sales tax rate is 8.2 percent. That doesn’t mean Texas doesn’t impose any taxes on its residents – it does.