Nine U.S. states do not levy a state income tax, allowing residents to keep more of their paycheck. However, some states still impose taxes on other forms of income or rely on other taxes to generate revenue.

Income-Tax-Free States

• Alaska
• Florida
• Nevada
• South Dakota
• Tennessee
• Texas
• Wyoming

States With Partial Income Tax Exceptions

• New Hampshire: Taxes dividends and interest at 3% (phasing out by 2025).
• Washington: Taxes capital gains on profits exceeding $250,000 at 7%.

Benefits of Living in No-Income-Tax States

• Higher Take-Home Pay: More money stays in your pocket.
• Retirement Perks: No state tax on Social Security, pensions, or 401(k) withdrawals in most cases.
• No Capital Gains Tax: Except in Washington and New Hampshire.

Drawbacks to Consider

• Higher Sales and Property Taxes: States often rely on these taxes for revenue, which can offset savings.
• Cost of Living: Some no-tax states, like Alaska or Washington, have higher living costs.
• Limited Deductions: Residents cannot fully utilize the state and local tax deduction on federal returns.

Cost and Affordability Rankings by State

| State | Tax Burden | Affordability Rank (U.S. News) | Notes |
|------------------|-----------------|-------------------------------------|----------------------------------------|
| Alaska | 4.6% (lowest) | 40/50 | High living costs, annual dividend. |
| Florida | 9.1% | 41/50 | Competitive housing market. |
| Nevada | 9.6% | 34/50 | Low property tax, higher housing costs.|
| South Dakota | 8.4% | 7/50 | Affordable housing and living costs. |
| Tennessee | 7.6% (3rd-lowest) | 14/50 | High sales taxes on certain items. |
| Texas | 8.6% | 33/50 | High property taxes. |
| Wyoming | 7.5% (2nd-lowest) | 18/50 | Low population, oil-dependent economy.|
| New Hampshire| 9.6% | 36/50 | High property taxes, no sales tax. |
| Washington | 10.7% | 46/50 | High housing costs, new payroll tax. |

Summing it up

• Moving to a no-income-tax state could mean higher savings, especially during retirement.
• Evaluate the cost of living, property taxes, and other taxes before making a move.
• Ensure residency rules (like living 183+ days per year) are met to benefit from the tax advantages.

Pro Tip: Use cost-of-living calculators and consult with a financial advisor to determine the true impact of moving to a no-income-tax state.

Next: Read 2500+ consumer guides to shopping, electronics, appliances, home services, cars, money and more.

❤ If you liked all this, consider supporting us by checking out Tiny Skills - 250+ Top Work & Personal Skills Made Easy