Here Are The States To Live In If You Want To Pay The Lowest Taxes On Your Income

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Updated on February 5, 2022 by
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Everybody wants to pay less taxes. And while you can’t live tax free anywhere – sales tax, property taxes and other forms of taxing will follow you everywhere you go – some states are definitely cheaper than others.

There are seven states in the country with no taxes on income, plus two other states that tax income only sometimes, depending on where the money comes from. But keep in mind that no tax on income doesn’t necessarily mean the state is a cheap place to live – some states make up for it by heavily taxing other things or increasing prices in goods and properties. This is, for example, the case of Alaska – very few taxes but also high cost of living.

So before you start packing your bags to head to one of these states, here’s a breakdown of what they have to offer.


Alaska is the only state that has neither sales tax nor tax on any type of personal income, including no inheritance tax. Local municipalities are allowed to impose their own general sales tax, which can be as high as 7%, but not everybody does, so many areas in the state remain truly tax free.

Alaska does charge taxes on other things, including gambling, liquor and tobacco, vehicle rentals, “bed” taxes (for people staying in local hotels and motels) and property taxes. Even with all these things combined, Alaska still has the lowest tax burden of any state: just over 5%.

Plus, Alaska residents are also entitled to an annual dividend payment (called PFD) from the Alaska Permanent Fund Corp., a multi-billion dollar fund made up of revenues from oil and gas industries. The PFD comes out to about $1,000 to $2,000 a year.


While Florida residents still have to pay pay federal income taxes, there is no state income tax here. There’s also no estate tax or inheritance tax in the state. Though there are no property taxes charged by the state, local governments do charge them. Interestingly, Florida offers a property tax exemption for homesteads, as well as a senior citizen property tax exemption in some counties.

Florida sales tax rate is 6%, which is relatively high compared to many other states. However, since many other things are tax free, the overall tax burden on residents is just 6.56%, one of the lowest in the country.


Of the states in the country with no income tax, Nevada comes in last. That’s because even though income isn’t taxed, the state sales tax is high (as much as 8.26% depending on the area) and applies to everything from food and clothes to hotels. Nevada also has sin taxes – taxes added to goods or services considered to be harmful or costly to society, such as alcohol, cigarettes and gambling. Winnings from gambling aren’t taxed, though, as these are considered income.

South Dakota

A taxpayer-friendly state with no income tax, South Dakota also has low sales taxes and special tax considerations for retirees. All forms of retirement income (including pensions and social security) are tax free and the state allows residents over the age of 70 to delay paying property taxes until they sell their home –so rather than paying for them every year, they’ll be able to pay them all at once later on.

South Dakota has high property taxes (the 17th highest property taxes in the country) and higher-than-average taxes on alcohol and cigarettes. These make up for the lack of income tax as an important source of revenue for the state.


On the positive side, Texas does not tax income and has one of the lowest taxes on gasoline in the country.

But Texas also has high property taxes, with the average household paying close to $3,000 a year in property taxes. In comparison, Hawaii has one of the lowest property tax rates – a home valued at over $300,000 will only cost you about $880 in yearly taxes in Hawaii.

Texas has state sales taxes of 6.25%, on the higher side when compared to other states. However, counties can choose to add additional sales taxes on top of that – and many do, increasing the number to as high as 8.25%, one of the highest sales tax rates in the country.


Washington doesn’t have personal or corporate income tax, though businesses do have to pay taxes. Not having individual income tax has helped Washington grow a lot and over the decades has attracted a young population ready to stick around for the long run.

On the negative side, Washington has one of the highest gasoline taxes in the country, and a higher-than-average sales taxes of 6.5% (plus any local taxes added on top by counties or cities).


Wyoming’s small population (the state is the second least densely populated state after Alaska) enjoys some of the lowest taxes in the US. At just 4%, the state sales tax is hard to beat, but Wyoming also has lower-than-average property and gasoline taxes.

Wyoming doesn’t tax income either, including no taxes on wages, capital gains, inheritances and retirement pensions.


Tennessee is one of two states that are “almost” tax free when it comes to income. While there’s no wage tax in the state, residents will have to pay taxes on dividend and interest income. And although the state’s sales, gasoline and beer taxes are high, Tennessee still comes out winning – the state’s total tax burden is just 6.28%, among the three lowest in the country.

New Hampshire

New Hampshire, like Tennessee, only taxes certain forms of income, but not wages. NH’s property taxes are one of the highest in the country, but the state does not have sales or inheritance taxes, which more or less make up for the difference.

The state’s low tax burden means money needs to come from somewhere else. One of those ways is from college tuition (one of the highest in the country) but property prices, insurance and other services also cost more than the national average.

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