Moving to a No-Income-Tax State: What You Save After Property and Sales Tax

Considering a move to a state with no income tax for a financial advantage? You're not alone. states currently have no broad-based individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. But the money picture isn't that simple. While relocating to one of these states can cut your federal tax burden, the savings from zero income tax are often offset by higher state and local property taxes and sales taxes. And establishing residency safely to avoid tax as a part-year domiciliary requires extra steps.

The “zero income tax” list

The list of states with no state income tax for individuals used to be longer. But Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have held out. And Alaska rejoined the no-income-tax group in 2021, after a break in which it allowed the state income tax to expire. As of 2026, New Hampshire also has no income tax, having fully repealed the tax on dividends and interest, completing a process begun in 2021.

What replaces income-tax revenue

The states that give up income tax revenue from residents do not expect state revenues to dry up. They collect the income-tax dollar as something else: by increasing property taxes on residents, or increasing sales taxes on goods and services. The result is that the no-income-tax states vary widely as to how much revenue they collect.

Where they excise income tax, New Hampshire and Alaska have no local or state sales taxes. Instead, they compensate with property-tax revenue. New Hampshire has an effective property-tax rate of about 1.50%, depending on the locality. And its per-capita state and local property tax revenue is among the highest of the no-income-tax states, at a high level per resident.

Texas's property-tax system is also not cheap.

On the other end of the spectrum, Nevada has an effective property-tax rate of around 0.50%, making it the cheapest of the no-income-tax states on that measure. But Nevada makes up for lost income-tax revenue with the wide jurisdiction of its sales-tax system. While it has no local sales taxes, Nevada can raise a substantial amount of revenue by imposing a state sales tax on everything from groceries to salaries and vendor commission, across the solid economic base of Las Vegas and Reno.

The local-sales-tax problem

The effective sales-tax burden in no-income-tax states is not just a matter of the state-level sales tax. Because many of these states also give local governments the right to impose sales taxes, an accurate comparison of sales-tax costs between jurisdictions demands a city-tax or county-tax report.

Alaska, for example, has no state sales tax, but a significant municipal sales-tax system.

Washington, similarly, has a sales-tax system that is wider at the local than the state level, with no statewide sales tax, but a county tax jurisdiction.

Nine states have no income tax, but six of them impose the tax burden from a principal source: in addition to Alaska, Washington and Florida also impose no broad-based state sales tax; in addition to New Hampshire, Nevada exempts everything from its sales-tax configuration except most manufactured goods.

But Tennessee, at 9.61%, has the highest combined sales-tax rate of the no-income-tax states. So while New Hampshire and Alaska have a decisive head start as having neither sales tax nor income tax, they often backload the burden onto property taxes and levy higher-than-average property-tax rates.

Residency and the move-year tax return

Individuals who move between states during the year may be surprised to learn that they are still often responsible for filing returns in each state that they have inhabited, and may be taxed as part-year residents. To prove residency changed, they will need a combination of documentation, and to prove that they swung their daily lives to the new state. So they often need to be able to go on the record with voter registration, a tax return, a driver’s license, and utility bills in the new domicile, and a claim that they lived in their old state for fewer days of the year. Familiarizing yourself with the transitions for residency is as important as knowing the level of sales and property taxes in the new domicile.

Why the “cheapest state” ranking misleads

Stepping back from the intensity of tax considerations in specific domiciles and eyes on the national tax landscape, no-income-tax states cover a broader range in tax-and-spending policies than the “lowest taxes” media stories would suggest. When you put property taxes and sales taxes together with income taxes, no-income-tax states fall all over the map, and backload their policy-heavy tax burden, or balance it across to other residents, in different ways. So figuring out the edge-tax cases, and how a given no-income-tax state handles its residents’ web of homeownership, income, and spending burdens, is the key to deciding between low-income-tax states.

In Texas, for example, you may pay no individual income tax, but you will pay your share of the high property-tax burden as a Texas resident. Texas has high property taxes among no-income-tax states, with rates around 1.40% to 1.50%. Because Texas homestead exemptions apply only to primary residences, they don’t relieve the burden, and in fact, push it onto property taxpayers who don’t have a permanent home in the state.

But the tax burden in New Hampshire differs from Texas in a key way. While Florida residents face property taxes, in terms of local and state property-tax, New Hampshire residents pay the second-highest of the no-income-tax states, with an average of 2.07%.

But for New Hampshire, that’s not the end of the story. A 0.00% state and local sales tax means that the burden is lower on Florida residents, even though Florida has the overall highest rate of the two states, compared to the local jurisdictions of these two no-income-tax states.

The edge cases

Washington is a good example. It has no income tax, but does levy a high tax on capital gains and dividends from business sales in the state, though it is not a broad-based income tax. But the result can be that key residents may experience a higher effective Washington state tax rate in some cases.

Other edge cases may also exist, such as where new residency rules, or business-economic exemption rules apply. So while the residency rules and politics can be simplified (signatures in one tax domicile and earnings activity in another can create complexity), the same is not true for the edge-tax calculations, or qualification for state income tax. Those resources may still form the basis for some residency or earnings-based tax through a state’s local jurisdiction.

But even at the national level, the specific dollar cost of living in a no-income-tax state, as a taxpayer, is a question mark that must be measured, how many individual assessments and deductions of state income exemptions. Solely comparing it to the average of the state income tax may still whitewash the complexity of where the tax burden falls—and whether it falls primarily on domiciled taxpayers, or instead on non-resident business owners and homeowners.