9 States with No Income Tax
If you choose to live in these states, every penny you earn is safe from state income tax. Two of the states do tax some dividends and interest, however.
Everyone hates paying taxes. So why don't we all live in one of the nine states without an income tax? Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don't tax earned income at all. If you're retired, that also means no state income tax on your Social Security benefits, withdrawals from your IRA or 401(k) plan, and payouts from your pension. That sounds pretty darn good to me!
But, of course, no state is perfect. The states without an income tax still have to pay for roads and schools, so residents still have to pay other taxes to keep the state running (like sales, property and estate taxes). And sometimes those other taxes can be on the high end. New Hampshire, for example, has some of the highest property taxes in the country. So, if you're thinking of moving to a state without an income tax, continue reading to see some of the other taxes you'll have to pay in those states. Maybe the state you're in right now won't look so bad.
Sales tax values are for 2020 and were compiled by the Tax Foundation. Property tax data is from 2018 and is based on information from the U.S. Census Bureau. Overall tax ratings are from the State-by-State Guide to Taxes.
Alaska
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: None.
Sales Tax: Alaska is one of five states with no state sales tax. However, localities can levy sales taxes, which can go as high as 7.5%. But, according to the Tax Foundation, the statewide average is only 1.76%.
Property Taxes: In Alaska, the median property tax rate is $1,183 per $100,000 of assessed home value. That's slightly above the national average.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
Florida
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: None.
Sales Tax: 6% state levy. Localities can add as much as 2.5%, and the average combined rate is 7.05%, according to the Tax Foundation. The combined rate is middle-of-the-road when compared to other states.
Property Taxes: In Florida, the median property tax rate is $928 for every $100,000 of assessed home value. That's also average nationally.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
Nevada
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: None.
Sales Tax: 6.85% state levy. Localities can add as much as 1.65%, and the average combined rate is 8.32%, according to the Tax Foundation. That's a below average combined rate.
Property Taxes: Nevada's median property tax rate is $636 per $100,000 of assessed home value, which is well below the national average.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
New Hampshire
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: New Hampshire doesn't tax earned income. But there's a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).
Sales Tax: New Hampshire has no sales tax whatsoever.
Property Taxes: The median property tax rate in New Hampshire is $2,195 for every $100,000 of assessed home value. That's the third-highest rate in the country.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
South Dakota
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: None.
Sales Tax: 4.5% state levy. Localities can add as much as 4.5%, and the average combined rate is 6.4%, according to the Tax Foundation. The combined rate is above average. Many services are taxed, as are groceries.
Property Taxes: The median property tax rate in South Dakota is $1,321 per $100,000 of assessed home value. That's above the national average.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
Tennessee
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: There's no tax on earned income. But Tennessee does have the Hall Tax, which taxes dividends and some interest at 2% for 2019. The first $1,250 in taxable income for individuals ($2,500 for joint filers) is exempt. The rate will drop to 1% in 2020, and then it will be phased out entirely after 2020.
Sales Tax: 7% state levy. Localities can add up to 2.75%, with an average combined rate of 9.53%, according to the Tax Foundation. That's the highest combined rate in the U.S. Groceries are taxed at 4% by the state, plus whatever local rate is in effect. Local taxes are limited, though: Only the first $1,600 of any item is taxable.
Property Taxes: The median property tax rate for Tennessee homeowners is $727 per $100,000 of assessed home value, which is below the national average.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
Texas
Overall Rating for Taxes: Tax-Friendly
State Income Taxes: None.
Sales Tax: 6.25% state levy. Localities can add up to 2%, with an average combined rate of 8.19%, according to the Tax Foundation. Texas' combined rate is well above the U.S. average.
Property Taxes: The median property tax rate in Texas is $1,807 per $100,000 of assessed home value. That's the seventh-highest rate in the country.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
Washington
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: None.
Sales Tax: 6.5% state levy. Municipalities can add up to 4% to that, with the average combined rate at 9.21%, according to the Tax Foundation. Washington's combined rate is the fifth-highest in the nation.
Property Taxes: The Washington median property tax rate is $1,008 for every $100,000 of assessed home value, which is below the national average.
Inheritance and Estate Taxes: An estate tax is imposed on estates exceeding $2.193 million. Rates range from 10% to 20%. Washington offers an additional $2.5 million deduction for family-owned businesses valued at less than $6 million. There is no inheritance tax.
Wyoming
Overall Rating for Taxes: Most Tax-Friendly
State Income Taxes: None.
Sales Tax: 4% state levy. Municipalities can add up to 2% to that, with a combined rate of 5.34%, according to the Tax Foundation. The combined rate is the eight-lowest in the U.S.
Property Taxes: In Wyoming, the median property tax rate is $609 per $100,000 of assessed home value, which is the ninth-lowest in the nation.
Inheritance and Estate Taxes: There is no inheritance tax or estate tax.
