Many people don't factor in sales taxes when they are looking at the tax-friendliness of different states. That's a mistake. Forty-five states plus the District of Columbia impose a sales tax. In addition, local sales tax is collected in close to 40 states. The combined state and local levy can be hefty as well.
On the flip side, residents are often hit hard with other taxes (like income or property taxes) in states that do not impose a sales tax. After all, money for roads and schools has to come from somewhere.
The information below will help you understand more about what you will really pay to live in the 5 states with no sales tax.
Disclaimer
Income tax brackets are 2022 values, unless otherwise noted. Median property tax rates are based on the most recent data available from the U.S. Census Bureau.
Alaska
Overall Rating for Middle-Class Families: Most tax-friendly
Sales Tax: While the Last Frontier has no state sales tax (yet), lawmakers are proposing a 2% statewide tax. Currently, Alaskans only pay local taxes (if they apply), which can go as high as 7.5%. But, according to the Tax Foundation, the statewide average is only 1.76%. That's the lowest combined average rate for states that impose either state or local sales taxes.
Income Tax Range: No state income tax.
Property Taxes: In Alaska, the median property tax bill is $3,464, which is above the national average.
For details on other state taxes, see the Alaska State Tax Guide.
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Delaware
Overall Rating for Middle-Class Families: Most tax-friendly
State Sales Tax: Delaware has no state or local sales taxes. It's interesting to note that, in response, New Jersey halved its sales tax in Salem County, which borders Delaware.
Income Tax Range: Low: 2.2% (on taxable income from $2,001 to $5,000). High: 6.6% (on more than $60,000 of taxable income). The top rate is middle-of-the-road when compared to other states. Wilmington imposes an additional 1.25% city tax on wages.
Property Taxes: For Delaware homeowners, the median property tax bill is $1,570 – the lowest among the states featured on this list.
For details on other state taxes, see the Delaware State Tax Guide.
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Montana
Overall Rating for Middle-Class Families: Tax-friendly
State Sales Tax: There is no state tax, but you might encounter tax on lodging and car rentals.
Income Tax Range: Low: 1% (on up to $3,100 of taxable income). High: 6.75% (on more than $19,800 of taxable income).
Beginning in 2024, the top income tax will decrease from 6.75% to 5.9%.
Property Taxes: For homeowners in Montana, the median property tax bill is $2,189, which is below the national average.
For details on other state taxes, see the Montana State Tax Guide.
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New Hampshire
Overall Rating for Middle-Class Families: Tax-friendly
State Sales Tax: None.
Income Tax Range: New Hampshire doesn't have an income tax. However, currently there's a 5% tax on dividends and interest in excess of $2,400 for individuals ($4,800 for joint filers).
The tax on dividends and interest is being phased out. The rate will be 4% for 2023, 3% for 2024, 2% for 2025, and 1% for 2026. The tax will then be repealed on January 1, 2027.
Property Taxes: The median property tax bill in New Hampshire is $6,036, which is well above the national average.
For details on other state taxes, see the New Hampshire State Tax Guide.
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Oregon
Overall Rating for Middle-Class Families: Not tax-friendly
State Sales Tax: None.
Income Tax Range: Low: 4.75% (on up to $7,500 of taxable income for married joint filers and up to $3,750 for single filers). High: 9.9% (on more than $250,000 of taxable income for married joint filers and more than $125,000 for single filers).
Counties and special districts can also impose local income taxes.
Property Taxes: The median property tax bill for Oregon homeowners is $3,352.
For details on other state taxes, see the Oregon State Tax Guide.
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