Imagine keeping more of your paycheck – no state income tax nibbling away at your earnings. It’s a tempting fantasy, especially if you’re from high-tax states like California or New York. But before you book a one-way ticket to Florida or Texas, let’s ask the real question: Does ditching state income taxes actually leave more money in your pocket – or could hidden costs erase those savings?

In this guide, we’ll unpack the truth about the nine states with no income tax. You’ll discover which locations offer genuine financial perks, where hidden taxes lurk, and how to decide if relocating aligns with your lifestyle and budget. Let’s dive in.

Which 9 states let you keep your entire paycheck?

Dreaming of skipping state income taxes? You’re not alone. Nine states with no income tax let residents pocket their full earnings – at least on paper. Here’s the full list:

Alaska: No income tax, but prepare for remote living and higher costs.
Florida: Sun, beaches, and zero income tax – but competitive housing markets.
Nevada: Glittering casinos fund tax revenue, yet sales taxes rank high.
New Hampshire: Phased out its 3% tax on dividends/interest in 2025.
South Dakota: Affordable living and low property taxes.
Tennessee: Scenic beauty with sky-high sales taxes (7% state rate).
Texas: No income tax, but property taxes are steep.
Washington: Taxes only long-term capital gains over $270,000 (7% rate).
Wyoming: Low population, low taxes, and wide-open spaces.

Washington’s capital gains tax is a key exception – it targets high-earning investors, not typical paychecks. New Hampshire also stands out: while it axed its investment income tax, it still leans on property taxes to fund services (Tax Foundation).

Bottom line? These states with no income tax aren’t entirely tax-free – but they’re closer than most.

No state income tax ≠ Tax-free living: Here’s why

Living in one of the nine states with no income tax might sound like a financial paradise – but don’t shred your tax forms just yet. These states still need revenue, and they often offset lost income taxes by hiking other levies. Here’s where your money might go instead:

Sales tax: Nevada’s combined 8.24% rate is among the nation’s highest.
Property yax: Texas homeowners pay nearly double the national average.
Excise tax: New Hampshire taxes gas, cigarettes, and even gambling winnings.

Even in these states, federal income taxes still apply (IRS guidelines), and Washington imposes a 7% tax on large capital gains. The takeaway? “Tax-free” living is a myth – but smart planning can help you keep more of your cash.

The hidden trade-offs of tax-free states

Moving to one of the nine states with no income tax could pad your wallet – or drain it through hidden costs. Let’s break down the pros and cons to see if the math adds up for you.

The upsides

Retirement-friendly policies: Keep more of your 401(k), pension, or Social Security income – most states with no income tax don’t touch retirement funds.
Capital gains protection: Only Washington taxes long-term investment profits (7% on gains over $270,000). Elsewhere, your stock wins stay safe from state levies.
Bigger paychecks: No state deductions mean more cash for vacations, savings, or that boat you’ve been eyeing.

The downsides

Property tax pitfalls: Texas charges homeowners a 1.7% average rate – nearly double the U.S. average (Tax Foundation).
Sales tax surprises: Nevada’s 8.24% combined rate hits everyday purchases, from groceries to gas.
Cost of living crunch: Washington’s housing costs rank 45th nationally, per U.S. News & World Report, erasing tax savings for many.
Fewer federal deductions: Itemizers lose out if state taxes (like sales or property) are lower than income taxes elsewhere.

Is it worth it? States with no income tax shine for remote workers, retirees, or renters – but homeowners or families may face sticker shock. Run your numbers twice.

From Alaska to Wyoming: Which tax-free state fits your lifestyle?

Not all states with no income tax are created equal. Some offer affordability but lack urban amenities; others have bustling cities but sky-high property taxes. Let’s compare all nine to see where your savings—and lifestyle—could thrive.

Alaska: No sales tax, but remote living and a 1.04% property tax rate. Affordability rank: 35/50.
Florida: 6% sales tax, low property taxes (0.71%), but housing costs rank 40/50 (U.S. News).
Nevada: High 8.24% combined sales tax, yet low 0.44% property tax. Ideal for renters.
New Hampshire: No sales tax, but the highest property taxes (1.61%) in the group. Affordability rank: 44/50.
South Dakota: Budget-friendly (5/50 affordability) with moderate sales (4.2%) and property taxes (1.01%).
Tennessee: 7% sales tax (2nd highest nationally), but low property taxes (0.48%) and mid-tier affordability.
Texas: No income tax, but 1.7% property tax—double the U.S. average (Tax Foundation).
Washington: 6.5% sales tax + 7% capital gains tax over $270K. Affordability rank: 47/50.
Wyoming: Low sales (4%) and property taxes (0.55%), plus wide-open spaces. Affordability rank: 19/50.

Key takeaways

Retirees: South Dakota’s affordability and Florida’s warm weather are top picks.
Remote workers: Texas and Tennessee offer low costs and vibrant cities.
Investors: Avoid Washington if capital gains exceed $270K.

While states with no income tax vary wildly in value, your ideal match depends on your job, hobbies, and tolerance for hidden costs. Next, let’s tackle how to prove you’ve moved there – without triggering an audit.

183 days or bust: How to prove you’ve left your old state

Moving to one of the states with no income tax isn’t as simple as renting a mailbox. To avoid dual-state tax battles, you must prove you’ve cut ties with your former home. Here’s how:

183-day rule: Most states require living there at least half the year. Track days meticulously – auditors check leases, utility bills, even doctor visits.
Update everything: Switch voter registration, driver’s license, and car insurance to your new address.
Sever ties: Sell or rent out your old home. Keep receipts for moving expenses.

States like New York and California aggressively pursue “statutory residents” who split time. Tread carefully – one misstep could mean owing taxes in two states. Work with a tax pro to dodge audits and maximize savings.

Tax savings vs. cost of living: Crunch the numbers

Will relocating to states with no income tax actually save you money? The answer hinges on your job, housing choices, and lifestyle. Let’s break it down:

Remote workers: Texas offers no income tax, but its 1.7% property tax rate could offset savings if you own a home.
Retirees: South Dakota’s 5/50 affordability rank means low costs, while Washington’s 47/50 ranking signals steep housing prices (U.S. News).
Homeowners: Nevada’s 0.44% property tax saves cash, but its 8.24% sales tax strains budgets.
Renters: New Hampshire’s lack of sales tax benefits apartment dwellers, but high rents may negate perks.

The verdict

You’ll save if: You rent in South Dakota, earn capital gains (outside Washington), or retire in Florida.
You’ll lose if: You buy a home in Texas or need urban amenities in pricey Washington.

Crunch your numbers: Compare local taxes, housing, and healthcare. Sometimes, states with no income tax cost more than high-tax hubs.

Ready to maximize your tax savings?

Relocating to states with no income tax isn’t a one-size-fits-all fix. While Alaska’s wild beauty and Florida’s sunny shores tempt with tax perks, hidden costs – like Texas’ property taxes or Washington’s sky-high rents – could cancel your gains.

Your ideal move depends on three factors: your job, your housing plans, and your tolerance for trade-offs. Retirees and remote workers often win; homeowners and city lovers might lose.

Ready to unlock smarter tax strategies? Contact H&S Accounting & Tax Services for personalized guidance. Let’s ensure your next move keeps more money in your pocket – no surprises.

9 States with no Income Tax – Should you Move There?