States With No Income Tax: A Complete 2024-2025 Guide
Nine U.S. states currently levy no individual income tax on wages. But the absence of an income tax does not always mean a lower overall tax burden, states compensate with higher sales or property taxes. This guide breaks down every tax-free state, compares the total tax burden, and explains when moving actually saves money.
FiscalStrong Editorial Team
Editorial Team
- 1.Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming) charge no individual income tax on wages.
- 2.Tax-free states typically compensate with higher sales or property taxes, Washington's combined sales tax exceeds 9%, New Hampshire has the highest median property tax.
- 3.The decision to move should consider total tax burden (income + sales + property), not just income tax in isolation.
- 4.High earners ($500k+) generally benefit most from tax-free states; retirees often benefit if the state also exempts Social Security and pension income.
- 5.Establishing residency requires more than an address, most states use a 183-day physical presence test plus 'domicile' indicators.
The 9 States With No Income Tax (2024-2025)
As of the 2024-2025 tax year, nine U.S. states do not levy a personal income tax on wages or salary: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire deserves special mention, historically it taxed interest and dividend income (the 'Hall tax'), but that tax was fully repealed effective January 1, 2025, making New Hampshire truly income-tax-free.
Each of these states funds its government through alternative revenue streams. Texas and Florida rely heavily on sales and property taxes. Alaska is unique, it has no state sales tax either, instead funding government through oil extraction taxes and paying an annual dividend to residents. Wyoming combines modest sales and property taxes with substantial mineral and energy extraction revenue.
It is critical to understand that 'no income tax' does not mean 'no taxes.' Every state on this list still imposes some combination of sales tax, property tax, excise tax, fuel tax, and corporate tax. The relevant question for any individual is whether their total tax burden, across all categories, would be lower in a tax-free state than in their current state. Always verify current rates with each state's Department of Revenue before making decisions.
Total Tax Burden: The Honest Comparison
Tax Foundation's 2024 State and Local Tax Burden Rankings show that tax-free states are not uniformly 'low tax.' Wyoming has the lowest overall state-local tax burden in the country at roughly 7.5% of income. But Washington ranks 18th highest at 9.4%, and Tennessee ranks 14th at 9.7%, both above the national average of 9.9%.
By contrast, California (top marginal income tax rate of 13.3%) has a total burden of about 11.2%, and New York (top rate 10.9%) has a total burden of about 12.7%. So a move from California to Texas can save a high earner several percentage points of total tax, but a move from California to Washington saves less than expected.
The break-even calculation depends heavily on your spending profile. Tax-free states with high sales taxes (Tennessee, Washington) penalize high spenders. Tax-free states with high property taxes (New Hampshire, Texas) penalize homeowners. Wyoming and Alaska remain the most consistently low-tax across all categories.
Use our Income Tax Calculator (Tools section) to estimate your federal and state taxes in different states. Always confirm current rates with each state's Department of Revenue before making financial decisions.
When Moving to a Tax-Free State Actually Saves Money
The clearest winners from relocation to a tax-free state are high earners, those with incomes above approximately $400,000, because the federal Tax Cuts and Jobs Act capped the state and local tax (SALT) deduction at $10,000. Before this cap, a California resident earning $1M paid roughly $130,000 in state income tax but could deduct a meaningful portion against federal tax. Today, that deduction is largely useless, making state tax rates a pure cost.
Retirees face a more nuanced calculation. Some tax-free states (Texas, Washington) do not tax Social Security, but neither do most states that DO have an income tax (37 states exempt Social Security entirely). For retirees, the more important questions are: (1) does the state tax pension income, (2) does it tax 401(k) withdrawals, and (3) what is the property tax on the home you will own?
The break-even income for relocation is generally lower than people expect. A married couple earning $250,000 in California with a $1M home would save approximately $18,000–$22,000 per year by relocating to Nevada or Texas. Subtract moving costs ($10,000–$30,000 one-time), real estate transaction costs, and the social/family cost of relocation, and the payback period is typically 2–4 years.
Establishing Residency: More Than an Address
Auditors in high-tax states (California, New York, New Jersey) are aggressive about auditing former residents who claim to have moved to a tax-free state. The audit examines both 'physical presence' (typically a 183-day test) and 'domicile' (the permanent home to which you intend to return).
Strong domicile indicators include: driver's license, voter registration, vehicle registration, mailing address, location of healthcare providers, location of religious/community involvement, and the address on your federal tax return. California's Franchise Tax Board specifically looks at where your 'closest family members' live and where you spend holidays.
Practical recommendation: if relocating, fully sever ties with the prior state in the same calendar year. Sell or rent out the prior home at arms-length (do not leave it vacant for personal use), change all registrations and licenses within 30-60 days, and document your days in each state with credit card receipts, plane tickets, and a calendar log. Many advisors recommend a 6-month-plus-1-day presence in the new state to leave no ambiguity.
New York's 'statutory residency' rule is particularly aggressive: if you maintain a permanent place of abode in NY and spend any part of 184 days in NY, you are taxed as a full-year NY resident on all income, even if your domicile is elsewhere. Always consult a qualified tax professional before relocating for tax purposes.
Hidden Costs Beyond Income Tax
Several tax-free states impose other costs that erode the apparent savings. Texas property taxes average 1.6% of home value annually, among the highest in the nation, and on a $750,000 home, that's $12,000 per year. Florida homeowners insurance costs have surged 30-100% since 2022 due to hurricane risk; some carriers have withdrawn from the state entirely. Washington's 7% capital gains tax (above ~$270,000 of long-term gains) blunts the appeal for investors.
Alaska, while having the lowest tax burden of any state, has a cost of living approximately 25% above the national average due to shipping costs. A 'no income tax' headline is meaningless if your housing and food costs consume the savings.
Finally, consider the long-term trajectory. States like Florida and Texas have seen significant population inflows, which is putting upward pressure on housing costs (Texas property values up 60% in five years in metros like Austin) and may eventually force legislators to revisit tax structure.
Bottom Line: A Decision Framework
Use this framework to decide whether a tax-free state move is worth it for your situation. Step 1: Calculate your current total state-local tax burden (income + sales + property). Step 2: Estimate your total tax burden in 2-3 candidate tax-free states using their actual rates. Step 3: Subtract the higher cost of living (especially housing) in the new state. Step 4: Subtract one-time relocation costs spread over a 5-year horizon. Step 5: Be honest about non-financial factors, proximity to family, climate, career opportunities, healthcare access.
If the net annual savings exceed $15,000-$20,000 and the non-financial factors are acceptable, the move is typically worth considering. Below that threshold, the friction of relocation often exceeds the lifetime benefit. Above $50,000 in annual savings, the decision is usually straightforward, particularly for those within 10 years of retirement.
Always consult a qualified tax professional licensed in both states before executing a relocation for tax purposes. The cost of professional advice is trivial compared to the cost of an audit or a poorly-timed move.
Which states have no income tax in 2024-2025?
Nine states have no individual income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire fully repealed its interest and dividends tax effective January 1, 2025. Always verify current rules with each state's Department of Revenue.
Do states with no income tax have higher property taxes?
Not always, but often. New Hampshire has the highest median property tax in the U.S. (~$7,018/year), Texas ranks 6th highest (~$3,905/year), and Washington is above average. Wyoming, Alaska, and Tennessee have lower-than-average property taxes.
Is moving to a no-income-tax state worth it for retirees?
It depends. Retirees should compare total tax burden (not just income tax), since 37 states already exempt Social Security. Property tax and pension/401(k) taxation matter as much as income tax rate. Always consult a qualified professional for your specific situation.
How do I establish residency in a tax-free state?
Most states use a 183-day physical presence test plus 'domicile' indicators (driver's license, voter registration, where you spend holidays, location of family, etc.). High-tax states like California and New York aggressively audit former residents. Document everything and consult a qualified tax professional.
Does Washington state really have no income tax?
Washington has no tax on wage income but enacted a 7% capital gains tax on long-term gains above approximately $270,000 (indexed annually) effective 2022. The tax was upheld by the Washington Supreme Court in 2023. Verify current rules with the Washington Department of Revenue.