| 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 States Rank (1=best) |
| Alaska | 4.93% | 1 | 35 | 45 |
| New Hampshire | 5.63% | 2 | 44 | 2 |
| Wyoming | 5.70% | 3 | 19 | 12 |
| Florida | 6.05% | 4 | 39 | 9 |
| Tennessee | 6.07% | 5 | 18 | 27 |
| South Dakota | 6.44% | 7 | 5 | 11 |
| Nevada | 7.37% | 10 | 33 | 33 |
| Texas | 7.56% | 14 | 28 | 29 |
| Washington | 8.04% | 22 | 47 | 8 |
1. Alaska
Total Tax Burden: 4.93%
Alaska has no state income or sales tax. The total state and local tax burden on Alaskans, including income, property, sales, and excise taxes, is just 4.93% of personal income, the lowest of all 50 states.
All residents of Alaska receive an annual payment from the Alaska Permanent Fund Corp. made up of revenue and investment earnings from mineral lease rentals and royalties. The per citizen dividend payment for 2023 was $1,312.
Alaska has one of the highest and fastest-rising healthcare costs of any state in the U.S. That said, at $13,642 per capita in 2020, it also spent the most on healthcare, excluding the District of Columbia. Alaska also spent $20,191 per student in fiscal year 2022, which places it in the top quartile for education spending in the U.S.
2. Florida
Total Tax Burden: 6.05%
Florida does not have a state income tax, making the Sunshine State a haven for the well-to-do and a large population of retirees. Sales and excise taxes in Florida are above the national average, but the total tax burden is just 6.05%—the fourth-lowest in the country.
As of 2024, Florida ranks 39th in affordability due to its higher-than-average housing costs. Its affordability has also been steadily decreasing, as it was ranked as the 31st most affordable state in 2020. Still, Florida is ranked 9th on the U.S. News & World Report’s “Best States” list.
In fiscal year 2022, Florida was one of the lowest states for education spending per capita, at $11,076. In 2021, the American Society of Civil Engineers (ASCE) gave Florida a C grade for its infrastructure. In 2014, its healthcare spending per capita was $8,076, $31 more than the national average; six years later, Florida spent $9,865 per capita in 2020.
Florida does impose a 5.5% corporate income tax but exempts all or part of that tax for LLCs, sole proprietorships, and S corporations.
3. Nevada
Total Tax Burden: 7.37%
Nevada relies heavily on revenue from high sales taxes on everything from food to clothes, sin taxes on alcohol and gambling, and taxes on casinos and hotels. This results in a state-imposed total tax burden of 7.37% of personal income for Nevadans, the third-highest on this list. However, it still ranks 10 out of 50 when compared with all states.
That said, the high costs of living and housing put Nevada closer to the bottom (33) when it comes to affordability. The state also ranks 33rd on the U.S. News & World Report‘s “Best States” list.
Nevada’s spending on education in 2022 was $11,677, among the lowest quartile across the United States. The latest infrastructure report card (as of 2024) from ASCE in 2018 gave Nevada a grade of C for its infrastructure.
Nevada has also spent relatively little on healthcare. Nevada’s healthcare spending in 2014 was $6,714 per capita, the lowest on this list and the fourth-lowest nationally. This has since increased to $8,348 per capita, but is now the third lowest by state.
4. South Dakota
Total Tax Burden: 6.44%
Like many states with no income tax, South Dakota rakes in revenue through other forms of taxation, including taxes on cigarettes and alcohol. The home of the Lakota Sioux and the Black Hills has one of the highest sales tax rates in the country and above-average property tax rates. South Dakota’s position as home to several major companies in the credit card industry, in addition to higher property and sales tax rates, helps to keep the state’s residents free from income tax.
South Dakotans pay just 6.44% of their personal income in taxes, according to WalletHub, ranking the state seventh in terms of the total tax burden. The state ranks fifth in affordability and 11th on the U.S. News & World Report “Best States” lists.
South Dakota spent $8,933 per capita on healthcare in 2014, the 14th highest in the nation. This has since improved as the latest report from 2020 shows South Dakota spending $12,495 per capita, climbing to 8th in the nation. It spent $11,564 per student in 2022, less than any other neighboring Midwestern state.
South Dakota hasn’t received an official letter grade from the ASCE, though much of its infrastructure is notably deteriorated, with 17% of bridges rated structurally deficient and 90 dams considered to have high hazard potential as reported in 2021.
5. Texas
Total Tax Burden: 7.56%
In the Lone Star State, state income taxes are unconstitutional. Still, because infrastructure and services must be paid for somehow, Texas relies on income from sales and excise taxes to foot the bill.
Sales tax can be as high as 8.25% in some jurisdictions. Property taxes are also higher than in most states, the net result of which is a total tax burden of 7.56% of personal income. Nevertheless, Texans’ overall tax bite is still one of the relatively lowest in the U.S., with the state ranking 14th. Texas is average for affordability at 28th in the nation, and it was ranked 29th by U.S. News & World Report on the “Best States” list.
Texas spent $11,803 per pupil on education in 2022. In 2021, the ASCE awarded it a grade of C for its infrastructure. Texas spent $6,998 per capita on healthcare in 2014, the seventh-lowest amount in the U.S. This since increased to $8,406 per capita, the fourth-lowest in the nation.
One advantage of living in a low-tax state is that the $10,000 cap on state and local tax (SALT) deductions imposed by the Tax Cuts and Jobs Act will likely not have as great an impact as it does on residents of high-tax states, such as California and New York.
6. Washington
Total Tax Burden: 8.04%
Washington hosts a young population, with only 15.9% of its residents over age 65, and many major employers, thanks to the lack of state-mandated corporate income tax. However, high-income earners are subject to state capital gains tax.
Residents do pay high sales and excise taxes, and gasoline is more expensive in Washington than in most other states. The state comes in at 22 out of 50, with a total tax burden of 8.04%.
Unusually higher-than-average living and housing costs hurt Washingtonians, putting the state at 47th in terms of affordability. For some residents that might not matter, however, because their state was ranked by U.S. News & World Report as the overall eighth best state.
Washington spent $7,913 per capita on healthcare in 2014, $132 below the national average. By 2020, Washington was spending $9,265 per capital, ranked 40th. Conversely, at $17,119 per pupil, it spent more on education than most in 2022. In 2019, Washington earned the same grade for its infrastructure from the ASCE.
7. Wyoming
Total Tax Burden: 5.70%
With an estimated six people per square mile, Wyoming is the second least densely-populated state, bested only by Alaska, which has roughly one human being for every square mile. Residents pay no personal or corporate state income taxes and no retirement income taxes. They also enjoy low sales tax rates. The total tax burden—including property, income, sales, and excise taxes as a percentage of personal income—is 5.70%, ranking the state sixth lowest.
Like Alaska, Wyoming taxes natural resources, primarily oil, to make up for the lack of a personal income tax. The state ranks 19th in affordability and 12th on the U.S. News & World Report’s list of “Best States.”
In 2021, Wyoming spent $18,529 per pupil, which is in the top quartile of U.S. states and double that per student of its neighbor, Idaho.
Wyoming’s healthcare spending in 2020 was also relatively strong at $10,989 per capita. In 2023, Wyoming received a C letter grade for its infrastructure from the ASCE.
8. Tennessee
Total Tax Burden: 6.07%
Before 2016, Tennessee taxed income from investments, including most interest and dividends but not wages. Legislation passed in 2016 included a plan to lower taxes on unearned income by 1% per year until the tax was eliminated at the start of 2021.
With full implementation of the new legislation, Tennessee expects to attract retirees who depend heavily on investment income. The state’s total tax burden is 6.07%, the fifth-lowest in the nation. In the affordability category, Tennessee ranks 18th overall, and on the U.S. News & World Report’s “Best States” list, it ranks 27th.
In 2022, at $11,317 per pupil, Tennessee ranked towards the bottom for education spending. At $9,336 per capita, Tennessee also ranked towards the bottom for healthcare spending in 2020. The state received a C letter grade for its infrastructure from the ASCE.
9. New Hampshire
Total Tax Burden: 5.63%
New Hampshire does not tax earned income but does tax dividends and interest. New Hampshire’s Senate passed legislation to phase out the investment income tax by 1% per year over five years, with full implementation by 2027. The state has no state sales tax but does levy excise taxes, including taxes on alcohol, and its average property tax rate of 1.86% of property values is the third highest in the country.
Even so, New Hampshire’s total tax burden is just 5.63%, according to WalletHub, ranking the state second in the nation. The state ranks second on the U.S. News & World Report‘s list of “Best States” and 44th in the nation for affordability.
New Hampshire spent a significant amount on education in 2022, at $21,605 per pupil, though it was outspent by several of its northeast neighbors. New Hampshire also received a grade of C- for its infrastructure in 2017. At $11,793 per capita in 2020, its healthcare spending is the twelfth highest in the nation.
Which Are the Tax-Free States?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.
Why Do States Charge a State Tax?
Following the adoption of the U.S. Constitution, the federal government was granted the authority to impose taxes on its citizens. Each state also retained the right to impose what kind of tax it wanted, excluding any that are forbidden by the U.S. Constitution as well as its own state constitution. These states fund their governments through tax collection, fees, and licenses.
Which States Don’t Tax Retirement Distributions?
Thirteen states do not tax retirement distributions. Illinois, Mississippi, and Pennsylvania don’t tax distributions from 401(k) plans, individual retirement accounts (IRAs), and pensions. Alabama doesn’t tax pensions, but 401(k)s and IRA distributions are taxed. The remaining nine states that don’t levy a state tax at all are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Alabama and Hawaii also don’t tax pensions but they do tax distributions from 401(k) plans and IRAs. However, states may make other accommodations for retirees. Colorado, for example, provides taxpayers ages 55 and older with a retirement income deduction of up to $20,000, and up to $24,000 for those 65 and older. And Georgia allows taxpayers age 62 and older to exclude up to $35,000 of their retirement income, while those 65 and older can exclude $65,000.
Which States Tax Social Security Benefits?
Does Florida Have a State Income Tax?
No, Florida is one of nine states that do not tax residents’ income. The other states are Alaska, Nevada, South Dakota, Tennessee, Texas, and Wyoming. In addition, Washington and New Hampshire tax investment income, but not wage income.
The Bottom Line
Despite the challenges no-tax states face, some seem to find a balance among low taxes, affordability, and providing a great place to live. Others struggle. One thing is clear: Low taxes alone do not equal a low cost of living. Take time to evaluate the entire picture of a state before you make a move.
