Skip to headerSkip to main contentSkip to footer
Get our Free E-newslettersGet our Free E-newsletters
Kiplinger logoLink to homepage
Get our Free E-newslettersGet our Free E-newsletters
Subscribe to Kiplinger
Subscribe to Kiplinger
Save up to 76%
Subscribe
Subscribe to Kiplinger
  • Store
  • Home
  • Investing
  • Retirement
  • Taxes
  • Personal Finance
  • Your Business
  • Wealth Creation
  • More
    • Podcasts
    • Economic Outlooks
    • Tools
  • My Kiplinger
    • Kiplinger's Personal Finance Magazine
    • The Kiplinger Letter
    • The Kiplinger Tax Letter
    • Kiplinger's Investing for Income
    • Kiplinger's Retirement Report
    • Store
    • Manage My E-Newsletters
    • My Subscriptions
  • Home
  • Tax Breaks
Tax Breaks

9 States with No Income Tax

If you choose to live in these states, every penny you earn is safe from state income tax (although two of the states do tax some dividends and interest). But that doesn't mean you won't have to pay other state and local taxes.

by: Sandra Block, Rocky Mengle
January 25, 2021
Barn with American flag imagery.

Getty Images

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 and Texas, for example, have 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.

  • The 10 Most Tax-Friendly States for Middle-Class Families

Average combined state and local sales tax values are for 2020 and were compiled by the Tax Foundation. Property tax data is from 2019 and is based on information from the U.S. Census Bureau. Overall tax ratings are from the State-by-State Guide to Taxes on Middle-Class Families.

1 of 9

Alaska

picture of Alaska wilderness

Getty Images

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 reach 7.5%. Higher rates are found in locations that lack a property tax. But, according to the Tax Foundation, the statewide average is only 1.76%.

Property Taxes: In Alaska, the median property tax rate is $1,182 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.

  • The 10 Least Tax-Friendly States for Middle-Class Families

2 of 9

Florida

picture of Florida palm trees at sunset

Getty Images

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 7.08%, according to the Tax Foundation. The combined rate is middle-of-the-road when compared to other states.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable (additional county tax on first $5,000 of purchase price may apply)
  • Prescription Drugs: Exempt

Property Taxes: In Florida, the median property tax rate is $830 per $100,000 of assessed home value. That's also pretty average when compared nationally.

Inheritance and Estate Taxes: There is no inheritance tax or estate tax.

  • Florida's 50 Largest Cities and Towns Ranked for Local Taxes

3 of 9

Nevada

picture of the Las Vegas strip

Getty Images

Overall Rating for Taxes: Most Tax-Friendly

State Income Taxes: None.

Sales Tax: 6.85% state levy. Localities can add as much as 1.53%, and the average combined rate is 8.23%, according to the Tax Foundation. That's a pretty high combined rate.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Property Taxes: Nevada's median property tax rate is $533 per $100,000 of assessed home value, which is one of the lowest rates in the U.S.

Inheritance and Estate Taxes: There is no inheritance tax or estate tax.

  • 5 States With No State Sales Tax

4 of 9

New Hampshire

picture of New Hampshire small town

Getty Images

Overall Rating for Taxes: Mixed Tax Picture

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 state or local sales tax.

Property Taxes: The median property tax rate in New Hampshire is $2,050 per $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.

  • State-by-State Guide to Taxes on Middle-Class Families

5 of 9

South Dakota

picture of Mount Rushmore

Getty Images

Overall Rating for Taxes: 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. That's a below average combined rate.

  • Groceries: Taxable
  • Clothing: Taxable
  • Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax
  • Prescription Drugs: Exempt

Property Taxes: The median property tax rate in South Dakota is $1,219 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.

  • State-by-State Guide to Taxes on Retirees

6 of 9

Tennessee

picture of pyramid building in Memphis

Getty Images

Overall Rating for Taxes: Most Tax-Friendly

State Income Taxes: Tennessee has no state income tax. But dividends and some interest are subject to the Hall Tax at a 1% rate. The first $1,250 in taxable income for individuals ($2,500 for joint filers) is exempt. 2020 is the last year for the tax, which is being phased out. Also, the tax is waived if you're over 100.

Sales Tax: 7% state levy. There's also an additional state tax of 2.75% on sales of single items that applies to the portion of the sales price from $1,600 to $3,200. Localities can add up to 2.75%, with an average combined state and local rate of 9.55%, according to the Tax Foundation. That's the highest combined rate in the nation. Local taxes are limited, though: Only the first $1,600 of any single item is taxable.

  • Groceries: Taxable (4% state rate; additional local taxes may apply)
  • Clothing: Taxable
  • Motor Vehicles: Taxable (7% basic rate, plus 2.75% state tax on sales price between $1,600 and $3,200; additional local taxes may also apply)
  • Prescription Drugs: Exempt

Property Taxes: The median property tax rate for Tennessee homeowners is $636 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.

  • 10 States With the Highest Sales Taxes

7 of 9

Texas

picture of cowboy riding a horse

Getty Images

Overall Rating for Taxes: Mixed Tax Picture

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.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Property Taxes: The median property tax rate in Texas is $1,692 per $100,000 of assessed home value. That's tied for the seventh-highest rate in the country.

Inheritance and Estate Taxes: There is no inheritance tax or estate tax.

  • 10 States with the Highest Gas Taxes

8 of 9

Washington

picture of Seattle skyline

Getty Images

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 9.23%, according to the Tax Foundation. Washington's combined rate is the fourth-highest in the nation.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable (6.5% ordinary rate, plus additional 0.3% tax)
  • Prescription Drugs: Exempt

Property Taxes: The Washington median property tax rate is $929 per $100,000 of assessed home value, which is close to the midpoint when compared to other states.

Inheritance and Estate Taxes: An estate tax is imposed by Washington on estates exceeding $2.193 million (the exemption threshold is subject to adjustment each year for inflation). Tax rates range from 10% to 20%. The state offers an additional $2.5 million deduction for family-owned businesses valued at less than $6 million.

  • 10 States With the Lowest Gas Taxes

9 of 9

Wyoming

picture of Wyoming mountain range

Getty Images

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 5.33%, according to the Tax Foundation. The combined rate is the eight-lowest in the U.S.

  • Groceries: Exempt
  • Clothing: Taxable
  • Motor Vehicles: Taxable
  • Prescription Drugs: Exempt

Property Taxes: In Wyoming, the median property tax rate is $575 per $100,000 of assessed home value, which is tied for the tenth-lowest in the nation.

Inheritance and Estate Taxes: There is no inheritance tax or estate tax.

  • 8 Steps to Appeal Your Property Tax Bill
  • state tax
  • income tax
  • Tax Breaks
  • taxes
Share via EmailShare on FacebookShare on TwitterShare on LinkedIn

Recommended

Is Your Stimulus Check Taxable?
Coronavirus and Your Money

Is Your Stimulus Check Taxable?

You may be wondering if you have to pay taxes on your second stimulus check. The answer may surprise you.
March 4, 2021
Taxes on Unemployment Benefits: A State-by-State Guide
state tax

Taxes on Unemployment Benefits: A State-by-State Guide

Don't be surprised by an unexpected tax bill on your unemployment benefits. Know where unemployment compensation is taxable and where it isn't.
March 3, 2021
IRS Extends April 15 and Other Tax Deadlines for Texas and Oklahoma Residents
Tax Breaks

IRS Extends April 15 and Other Tax Deadlines for Texas and Oklahoma Residents

Following FEMA's recent disaster declaration for winter storms in Texas and Oklahoma, victims of the recent winter storms in those states get more tim…
February 28, 2021
House Approves $3,000 Child Tax Credit for 2021
Coronavirus and Your Money

House Approves $3,000 Child Tax Credit for 2021

The proposal would temporarily increase the child tax credit to $3,000 or $3,600 per child for most families and have 50% of it paid in advance by the…
February 27, 2021

Most Popular

Where's My Refund? How to Track Your Tax Refund Status
tax refunds

Where's My Refund? How to Track Your Tax Refund Status

If you're waiting for your tax refund, the IRS has an online tool that lets you track the status of your payment.
March 2, 2021
Will Your Stimulus Check Increase Your Tax on Social Security Benefits?
Coronavirus and Your Money

Will Your Stimulus Check Increase Your Tax on Social Security Benefits?

The answer to this question comes down to whether your stimulus check increases your "provisional income."
March 1, 2021
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
  • Customer Service
  • About Us
  • Advertise With Us (PDF)
  • Privacy Policy
  • Cookie Policy
  • Kiplinger Careers
  • Accessibility
  • Privacy Preferences

Subscribe to Kiplinger's Personal Finance

Be a smarter, better informed investor.
Save up to 76%Subscribe to Kiplinger's Personal Finance
Dennis Publishing Ltd logoLink to Dennis Publishing Ltd website
Do Not Sell My Information

The Kiplinger Washington Editors, Inc., is part of the Dennis Publishing Ltd. Group.
All Contents © 2021, The Kiplinger Washington Editors

Follow us on InstagramFollow us on FacebookFollow us on TwitterConnect on LinkedInConnect on YouTube