Living in a state with no income tax can feel like getting an instant raise, but not all tax-free states are created equal. You might not be paying state income taxes, but you’ll pay in other ways. From sky-high housing costs to hidden fees, some “no-tax” states may actually cost you more. We’ve ranked all nine U.S. states with no income tax from worst to best, factoring in affordability, quality of life, and long-term financial impact. Here they are.
9. Washington
Washington might seem like a dream for tech workers, but it comes with a catch. While there’s no income tax, the state imposes a 7% capital gains tax on high earners. Housing costs in Seattle and surrounding areas are among the highest in the country, and sales taxes can top 10%. The job market is strong, but the cost of living offsets much of the tax savings. For retirees or middle-income families, Washington may not deliver the value you’d expect.
8. Alaska
Alaska offers no income tax and even pays residents an annual Permanent Fund Dividend, which was $1,312 in 2024. But the trade-offs are steep: remote location, high cost of goods, and limited healthcare access. Winters are long and brutal, and travel to the Lower 48 can be expensive. While great for adventurers and those seeking solitude, it’s not ideal for everyone. The tax savings are real, but so are the lifestyle challenges.
7. New Hampshire
New Hampshire is phasing out its interest and dividends tax, which will be fully gone by 2027. That means it’ll soon be a true no-income-tax state. However, it ranks low due to high property taxes (among the highest in the nation) and limited public transportation. The cost of living is also above average, especially in southern areas near Boston. Still, it’s a solid pick for those who value safety, schools, and scenic beauty.
6. South Dakota
South Dakota is a favorite for business owners and retirees alike. It has no income tax, low property taxes, and a business-friendly climate. But it’s not for everyone. Winters are harsh, and rural areas can feel isolated. Healthcare access is limited outside major cities like Sioux Falls. If you’re financially independent and value peace and quiet, South Dakota offers strong tax advantages.
5. Nevada
Nevada’s no-income-tax status is a big draw, especially for Californians fleeing high taxes. The state makes up for it with high sales taxes and elevated housing costs in Las Vegas and Reno. Still, there’s no tax on Social Security or pensions, making it attractive for retirees. Entertainment, outdoor recreation, and a growing job market add to its appeal. Just be prepared for scorching summers and a competitive housing market.
4. Tennessee
Tennessee eliminated its tax on interest and dividends in 2021, making it a full no-income-tax state. It boasts a low cost of living, booming cities like Nashville and Chattanooga, and mild winters. Property taxes are reasonable, and the state is increasingly popular with remote workers and retirees. However, sales taxes are high, up to 9.55% in some areas. Still, the overall affordability and cultural vibrancy make Tennessee a strong contender.
3. Texas
Texas is a heavyweight in the no-income-tax conversation. It offers robust job opportunities, especially in tech, energy, and healthcare. But beware: property taxes are among the highest in the U.S., and housing prices in cities like Austin have soared. The state’s size means your experience can vary widely depending on where you live. For many, the economic opportunity outweighs the costs.
2. Florida
Florida is a perennial favorite for retirees and for good reason. There’s no income tax, and Social Security benefits aren’t taxed, either. The state offers year-round sunshine, no estate tax, and a wide range of housing options. While property insurance and hurricane risks are concerns, Florida’s overall affordability and lifestyle perks are hard to beat. It’s a top pick for those seeking both tax relief and warm weather.
1. Wyoming
Wyoming takes the crown as the best no-income-tax state in 2026. It combines no income tax, low property taxes, and no estate or inheritance tax. The cost of living is below the national average, and the state boasts stunning natural beauty and low crime rates. While winters can be cold, the lack of traffic, clean air, and wide-open spaces appeals to many. For those seeking maximum tax savings and a slower pace of life, Wyoming is hard to top.
Tax-Free Doesn’t Mean Cost-Free
Living in a no-income-tax state can be a smart financial move, but only if you consider the full picture. High sales taxes, property taxes, and the cost of living can eat into your savings fast. Before relocating, weigh your income level, lifestyle needs, and long-term goals. What works for a tech worker in Seattle may not suit a retiree in rural Tennessee. The best state for you is the one that balances tax savings with quality of life.
Are you thinking about moving to a no-income-tax state? Which one would you choose, and why? Let us know in the comments!
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The post 9 States With No Income Tax — Ranked From Worst to Best appeared first on Clever Dude Personal Finance & Money.
