States with No Income Tax in the United States

Last updated: May 2025.

As of 2025, nine U.S. states levy no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. For high-net-worth individuals, understanding the nuances of these tax structures is crucial for effective financial planning.

Comparing States With No Income Tax: What You Need to Know in 2025

State income tax is often one of the most significant recurring tax liabilities for individuals with high earnings. Top earners in states with progressive tax systems like California or New York can face marginal rates above 10%. By relocating to a state with no personal income tax, investors can potentially retain hundreds of thousands of dollars annually, depending on their income structure.

However, not all "no-income-tax" states are equal. The absence of an income tax doesn’t mean these states are uniformly low-tax jurisdictions. Many offset the lost revenue through higher taxes elsewhere, such as sales tax, property tax, or specific business levies.

>> You may calculate your income tax with our Florida tax calculator

List of States with No Income Tax in 2025

Key Changes in 2025

• New Hampshire: Effective January 1, 2025, the state has completed the repeal of its 5% tax on interest and dividends, positioning it fully among income-tax-free states.

• Washington: While there is no general income tax, a 7% capital gains tax on annual gains exceeding $270,000 remains, impacting those with high investment income.

Hidden Costs in No-Income Tax States

While a zero income tax policy is appealing, it's vital to assess how states make up for that lost revenue:

• Texas: While it offers zero income tax, it ranks among the top five states for property tax burden.

• Nevada: Sales tax rates vary by locality, with some exceeding 8.375%.

• Tennessee: The state imposes one of the highest sales tax rates in the country, at an average of 9.55%.

• New Hampshire: It compensates with some of the highest property tax rates nationwide, despite no sales or income tax.

Understanding these trade-offs is essential for effective wealth preservation. For example, an investor moving from California to Texas may save significantly on income tax, but the property tax on luxury real estate in Austin or Dallas could be steep.

Estate and Inheritance Tax Considerations

While states with no income tax offer relief on earned income, high-net-worth individuals should also evaluate estate and inheritance tax rules when planning for long-term residency.

High-net-worth individuals must also consider estate and inheritance taxes when planning long-term relocation. Most no-income-tax states do not impose estate or inheritance taxes, which can be a strategic advantage for intergenerational wealth transfer:

• Florida, Texas, Nevada, Wyoming, South Dakota: No state-level estate or inheritance taxes.

• Washington: impose an estate tax, with a top rate of 20% on estates exceeding $11.2 million.

For those setting up family offices or trust structures, states like South Dakota and Wyoming are particularly attractive due to their favorable trust laws and long-term asset protection.

Business Taxes and Corporate Considerations in No-Income-Tax States

No income tax doesn't always mean a low business tax burden. For entrepreneurs and business owners, state-specific rules can influence entity formation and expansion strategies. For entrepreneurs and business owners, state tax policies can impact not just personal income but also business operations. States like:

• Nevada and Wyoming offer business-friendly environments with no corporate income tax and minimal reporting requirements.

• Texas imposes a gross receipts-based "franchise tax," which can affect high-volume businesses.

• Florida has a flat 5.5% corporate income tax but remains a popular base due to its international connectivity and talent pool.

These nuances are important when choosing the best state not just for residency but also for entity formation and business expansion.

Strategy Is Key

Relocating to a no-income-tax state can be a smart move for wealth preservation, but it requires careful analysis of the overall tax burden, lifestyle factors, and long-term financial goals. Consulting with tax advisors, estate planners, and corporate attorneys is essential to ensure your strategy aligns with your financial vision.

Whether you're planning to move your personal residency, launch a new business, or restructure your investment portfolio, understanding the fiscal implications of each state can help you make informed and advantageous decisions.

Frequently Asked Questions

What is the most tax-friendly state?

For those looking for the most tax-friendly states with no income tax, Wyoming stands out as an ideal destination, Wyoming is an ideal destination. MoneyGeek’s analysis revealed that it tops the list, followed by Nevada, Tennessee, Florida, and Alaska. All of these states have one thing in common - they have no state income tax.

Washington and South Dakota, which both received a B, are also without state income tax, making them desirable locations as well.

What is the downside to states with no income tax?

Without income tax, states may have to raise other taxes or offer fewer public services to make up for the revenue. This could lead to higher property and sales taxes, decreased investment in infrastructure, and limited deductions, which can be detrimental to individuals and businesses.

Overall, the lack of income tax can create disadvantages for residents.

Does Florida have a state income tax?

In conclusion, Florida does not have a state income tax for individuals or corporations. It is one of nine states with no income taxes and instead relies on sales taxes and other taxes to generate revenue for its state government.

Is it better to live in a state with no income tax?

Living in a state with no income tax can offer significant financial advantages, particularly for high-income earners, retirees, and business owners. The immediate benefit is the reduction of state-level tax burdens on wages, dividends, or capital gains. 

For example, while Florida and Texas offer no personal income tax, their reliance on higher consumption or property taxes can offset some of those savings, depending on an individual’s lifestyle and asset portfolio. Ultimately, relocating to a no-income-tax state is often most advantageous when combined with effective wealth planning and entity structuring.

How do no-income tax states fund public services?

States without an income tax typically generate revenue through alternative mechanisms such as sales taxes, property taxes, fuel taxes, tourism, and fees. According to analyses by EY and other global accounting firms, these states often design broad consumption-based tax structures that distribute the tax burden differently across residents and businesses.

For instance, Nevada relies heavily on tourism and gaming revenue, while Texas imposes substantial property taxes and a gross receipts tax on businesses. This model can be efficient but may result in underfunded social programs or limited public infrastructure unless managed through diversified economic policies.