Nine states let you keep your full paycheck without a state income tax bite: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. But knowing the list doesn't tell you whether moving actually saves money. Every state funds its budget somehow—through high sales taxes, property taxes, or natural resource revenue. This guide walks through every trade-off, every hidden cost, and which situations make a no-income-tax state worth the move in 2026.

TLDR:

• Nine states collect no income tax in 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
• High earners save $25,000 to $50,000 annually by moving from high-tax states like California to no-income-tax states.
• Texas and New Hampshire offset no income tax with property tax rates up to 1.60% and 1.89%, respectively.
• Retirees keep 100% of Social Security, pension, and 401(k) income at the state level in all nine states.
• Bolto handles employer registration and withholding requirements across all U.S. states for distributed teams.

The 9 States With No Income Tax in 2026

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming collect no state income tax on wages or salaries. That's the complete list for 2026, and it has stayed at nine states for several years running. For comparison, state income tax rates in the remaining 41 states range from flat rates around 3% to progressive brackets topping 13%.

Each state funds its government differently. Some lean heavily on sales taxes, others on natural resource revenues, and a few on a mix of property taxes and tourism-driven income. The trade-offs vary widely; knowing the full picture matters before drawing any conclusions about where to live or relocate a business.

New Hampshire sits in an interesting position: it taxed interest and dividend income at progressively reduced rates through 2024, with full repeal taking effect on January 1, 2025. As of 2026, residents pay no state income tax on wages and no tax on investment income. Alaska and New Hampshire are also the only two states on this list with no statewide sales tax, though Alaskan municipalities can levy their own local sales taxes.

What No State Income Tax Actually Means (And What It Doesn't)

Living in a state with no income tax sounds like an automatic win. Your paycheck lands with more money in it, and you skip a filing you'd otherwise dread. But the full picture is more layered than that.

States still need revenue. When they forgo income taxes, they typically make it up through higher sales taxes, property taxes, or fees. Texas, for instance, has no state income tax but carries some of the highest property tax rates in the country. So your take-home pay grows, but your housing costs may rise to compensate.

Here's what matters for your situation:

• If you rent and spend modestly, a no-income-tax state can genuinely reduce your tax burden since you avoid both income and some consumption taxes.
• If you own property, the benefit shrinks fast. High property tax rates can easily outpace what you'd have paid in state income taxes.
• If you're retired and drawing from Social Security or a pension, the calculus shifts again. Some states with income taxes actually exempt retirement income entirely, making them more favorable for retirees than a blanket no-income-tax label suggests.
• If you're a high earner, skipping a 5% to 13% state income tax rate is a real, measurable gain regardless of other taxes.

No single tax tells the whole story. Your total tax burden depends on how you earn, own, and spend.

The Tax Trade-Off: How No-Income-Tax States Generate Revenue

No-income-tax states don't simply forgo revenue. They replace it through other mechanisms, and understanding those trade-offs helps you judge whether relocating actually saves you money.

Here's how the nine states typically make up the difference:

• Sales taxes tend to run higher. Tennessee and Washington both rely heavily on sales tax, with Washington's base rate sitting at 6.5% and Tennessee reaching a combined average of over 9% when local taxes are added in.
• Severance and extraction taxes fund states with natural resources. Wyoming and Alaska lean on oil, gas, and mineral revenues to cover a significant share of state budgets.
• Property taxes carry more weight. Some no-income-tax states offset the gap through higher property tax rates, though this varies widely by county and municipality.
• Business and franchise taxes fill gaps. Nevada and Wyoming both use business license and franchise fees as meaningful revenue sources.

The practical takeaway is that your total tax burden depends on your situation. A retiree living on investment income in Florida may come out well ahead. A family renting in Washington and buying most goods locally may find the sales tax exposure adds up faster than expected.

Property Tax Comparison Across No-Income-Tax States

Property taxes vary widely across the nine no-income-tax states, and this difference can meaningfully affect your total tax burden depending on where you land.

Here's how they compare:

Nevada and Wyoming sit at the lower end, making them attractive for property owners. New Hampshire and Texas carry notably higher rates, which can offset the income tax savings for homeowners over time.

A few other factors worth knowing:

• Texas offers no income tax but has one of the highest property tax rates in the country, so homeowners often pay more in property taxes than they would in a moderate-income-tax state.
• Florida provides a homestead exemption that reduces the assessed value of a primary residence, lowering the effective rate for permanent residents.
• Several states cap how much assessed value can increase year over year, which protects long-term owners from rapid tax hikes even as home prices rise.
• Veterans, seniors, and disabled residents may qualify for additional exemptions in most of these states, sometimes reducing their effective rate to near zero.

If property taxes are a deciding factor for you, Wyoming, Nevada, and Tennessee offer the most favorable combination of no income tax and low property tax rates.

Sales Tax Breakdown: What You'll Pay on Everyday Purchases

Sales tax hits your wallet on nearly every purchase you make, from groceries to electronics to clothing. Unlike income tax, which is collected annually, sales tax is a constant presence at checkout.

Five states collect no statewide sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. If you live in one of these states, you keep the full sticker price on most purchases.

Keep in mind that local counties and cities often add their own sales tax on top of the state rate, pushing your actual out-of-pocket rate higher than what appears in a state-level comparison.

What Sales Tax Exemptions Actually Cover

Even in high-rate states, certain categories are often exempt. Groceries, prescription medications, and clothing below a price threshold are common exemptions. Some states also waive sales tax on vehicles purchased for agricultural use or on energy used in manufacturing.

If you are a retiree on a fixed income, these exemptions can meaningfully reduce the real-world impact of living in a state with a higher headline rate.

Cost of Living Analysis: Where No Income Tax Actually Saves Money

No income tax means more only when housing, groceries, and utilities don't quietly absorb those savings.

Add a low property tax rate and no income tax to that picture, and Tennessee builds a strong case for residents watching their total budget.

Washington tells a different story. Seattle's housing market consistently ranks among the most expensive in the country, and the broader state cost of living reflects that pressure. The absence of income tax matters less when rent has already absorbed the equivalent hit.

Alaska adds geographic isolation to the equation. Shipping costs drive up groceries and goods, which means residents pay a premium that income tax savings alone rarely cover. For those focused on genuine affordability, the states with both low taxes and low baseline costs, Tennessee, Wyoming, and South Dakota in particular, tend to deliver the clearest real-world advantage.

No-Income-Tax States for Retirees: Retirement Income and Benefits

For retirees, the no-income-tax advantage is straightforward. Social Security checks, pension distributions, IRA withdrawals, and 401(k) income all clear at the state level without a deduction. No state return, no state-level withholding, no carve-outs to track. You keep the full amount your federal filing leaves you with, though you'll still need to handle federal withholding correctly.

This matters more than it might seem. A retiree pulling $60,000 per year from a mix of Social Security and retirement accounts would owe zero state income tax across all nine states, compared to potentially hundreds or thousands of dollars in a state like Minnesota or Vermont, which do tax a portion of Social Security income.

Florida draws the largest share of retirees for good reason. No income tax, no estate tax, and a warm climate combine in ways that make the financial math and the lifestyle case simultaneously. Nevada and Tennessee round out the short list for retirees who also want low property tax exposure on top of the income tax benefit.

The one area worth watching is healthcare costs. Several of these states rank below average for Medicare Advantage plan availability or have higher out-of-pocket averages in rural counties. Tax savings can be real, but healthcare access and costs vary enough by county that they belong in your relocation checklist alongside the tax picture.

Who Benefits Most From Living in a No-Income-Tax State

High earners gain the most from no-income-tax states. A W-2 employee earning $400,000 to $500,000 who relocates from California, with a top marginal rate of 13.3%, or from New York to Florida or Texas can eliminate $25,000 to $50,000 in annual state income tax. That number compounds over a career.

Lower-income households often see thinner benefits. Sales taxes are regressive by nature: a household spending most of its income on goods and services pays a larger share of total earnings at checkout than a high earner who saves or invests a large portion. In high-sales-tax states like Tennessee, that exposure is real.

Renters come out ahead more consistently than homeowners, since they capture income tax savings without the property tax offset that erodes the benefit for people who own homes. For remote workers earning strong salaries in tech or finance, moving to a no-income-tax state with a low cost of living stacks the advantage further.

How to Establish Residency: What It Takes to Claim Tax Benefits

Moving to a no-income-tax state looks great on paper, but the IRS and state tax agencies care about where you actually live, not just where you park your car or open a bank account.

Here's how residency works in practice.

What States Actually Look For

Most states use a "domicile" test to determine your true home. Domicile is the place you intend to return to permanently. To pass that test, you generally need to show:

• Your primary residence is in the new state, with a lease or deed to back it up
• Your driver's license and vehicle registration reflect the new state's location
• You're registered to vote there
• You've updated your location with banks, employers, and the Social Security Administration
• You spend more days in the new state than in any other single state across the tax year

The 183-Day Rule

Many states with income taxes aggressively audit former residents who claim they've moved. Some states, like California and New York, are known for pursuing high earners who relocate. The most common standard is the 183-day rule: spending more than 183 days in a state can trigger residency for tax purposes, even if your official address is elsewhere. Residency requirements vary by state, so understanding your specific situation matters. Keep records like travel logs, credit card statements, and phone location data if you want your move to hold up to scrutiny.

Part-Year Residency

If you move mid-year, you'll likely file as a part-year resident in both your old and new states. You'll owe income tax in the original state for the portion of the year you lived there, and in the new state for the remainder. The transition year is often the most complicated filing year, so working with a tax professional during that period is worth considering, particularly one using the best payroll software for accountants to handle multi-state scenarios.

Hiring and Paying Teams Across No-Income-Tax States

If your team spans multiple states, or if you're a founder hiring remote workers who live in no-income-tax states, payroll gets more manageable on the worker side but no less complex on the employer side.

Here's the core issue: even when an employee lives in Texas, Florida, or Nevada, you still owe federal payroll taxes, Social Security, and Medicare on every dollar you pay them. State income tax withholding disappears from the equation, but your compliance obligations do not.

A few things to keep in mind as you build distributed teams across these states:

• Workers in no-income-tax states often have higher take-home pay than peers in high-tax states earning the same gross salary, which can affect your compensation benchmarking and offer competitiveness.
• Each state still has its own unemployment insurance (UI) rates, workers' compensation rules, and sometimes local taxes at the county or city level that apply regardless of state income tax policy.
• If you have employees in multiple states, you need to register as an employer in each one, even if those states have no income tax, and the same holds true for payroll for one employee in any single state. Skipping this step creates compliance exposure.
• Some no-income-tax states, like Washington, still have payroll-adjacent obligations such as the state's paid family and medical leave program, which requires employer contributions.

Getting this right across a distributed workforce takes more coordination than most founders expect. Bolto helps growing companies hire, pay, and manage teams across every U.S. state without manually tracking each state's employer registration and withholding requirements.

Final Thoughts on Living and Working in No-Income-Tax States

The nine states with no income tax deliver measurable savings for high earners and retirees, but the trade-offs in property tax and sales tax shift depending on where you land. Your housing situation, spending habits, and income sources determine whether the move actually lowers your total tax bill. If you're managing payroll across these states, Bolto automates the state registration and compliance tracking so you stay focused on building your team.

FAQ

Which states have no income tax in 2026?

Nine states collect no state income tax on wages or salaries in 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. This list has remained stable for several years, and each state replaces lost revenue through sales taxes, property taxes, or resource extraction fees.

Are states with no income tax actually cheaper to live in?

Not necessarily. States without income tax typically offset lost revenue through higher property taxes, sales taxes, or both, which means your total tax burden depends on how you earn, own, and spend. For example, Texas has no income tax but some of the highest property tax rates in the country, while Tennessee relies on one of the highest state sales tax rates at 7%.

What state has the lowest property taxes for retirees?

Wyoming, Nevada, and Tennessee offer the most favorable combination of no income tax and low property tax rates. Wyoming sits at 0.55% effective property tax rate, Nevada at 0.48%, and Tennessee at 0.56%, making them attractive for retirees who want to minimize both income and property tax exposure while living on fixed retirement income.

Which states have no income tax and low sales tax?

Wyoming and South Dakota both have no income tax and relatively low state sales tax rates, at 4% and 4.5% respectively. Alaska and New Hampshire have no income tax and no statewide sales tax at all, though Alaska allows municipalities to levy local sales taxes.

What are the 3 states that don't tax retirement income?

Among the nine no-income-tax states, Florida, Nevada, and Tennessee stand out for retirees because they tax no retirement income whatsoever: Social Security, pension distributions, IRA withdrawals, and 401(k) income all clear at the state level without any deduction. However, several states with income taxes also exempt retirement income entirely, so the no-income-tax label alone doesn't tell the full story for retirement planning.