1. Tennessee
Known for its country music and southern hospitality, Tennessee also offers residents the benefit of zero state income tax. While it previously taxed interest and dividend income, even that was phased out by 2021, according to the Tennessee Department of Revenue, leaving Tennesseans completely free from state income taxes. This tax structure makes Tennessee an attractive destination for retirees, professionals, and families alike.
Instead of relying on income taxes, Tennessee generates revenue through sales taxes, which are among the highest in the nation. While this might seem like a downside, the lack of an income tax still leaves most residents with more money in their pockets. Coupled with a moderate cost of living and a booming job market—thanks to industries like healthcare, manufacturing, and entertainment—Tennessee strikes a balance between financial savings and vibrant living.
2. Alaska
Alaska isn’t just about breathtaking landscapes, glaciers, and moose sightings—it’s also a paradise for people who want to avoid state income taxes. According to Tax Foundation, the state doesn’t tax personal income at all, which is a huge benefit for residents. This financial freedom is partly thanks to Alaska’s reliance on oil revenue to fund its public services and government operations. The state earns billions annually from oil extraction and production, which means residents don’t have to bear the burden of income taxes to make up for funding shortfalls.
But that’s not all. Alaska takes things a step further by actually paying its residents! Through the Alaska Permanent Fund, eligible residents receive an annual dividend check that averages around $1,000–$2,000, depending on oil prices and fund performance. While living in Alaska does come with a higher cost of living—think pricey groceries and heating bills—the lack of state income tax and the yearly dividend make it an attractive choice for those who love adventure, independence, and wide-open spaces.
3. Nevada
Beyond the neon lights and casinos of Las Vegas, Nevada offers residents the unique benefit of zero state income tax, per the State of Nevada’s Department of Taxation. The Silver State attracts a mix of professionals, entrepreneurs, and retirees who are eager to maximize their income. Nevada’s tax-free status is possible because its economy is heavily supported by the gaming and tourism industries, which generate billions in revenue annually.
What makes Nevada even more appealing is its pro-business environment. Many companies choose to establish themselves here, taking advantage of the absence of corporate income taxes alongside no personal income tax. For residents, this translates to a vibrant job market and a growing economy. Whether you’re drawn to the high-energy city life of Las Vegas or the scenic serenity of Lake Tahoe, living in Nevada comes with the financial freedom to truly enjoy it all.
4. South Dakota
South Dakota may not be as flashy as some of the other states on this list, but it’s a gem for anyone who values low taxes and a straightforward way of life. The state doesn’t impose a personal income tax, allowing residents to keep more of what they earn. South Dakota relies on revenue from sales taxes, tourism, and industries like agriculture to fund its government and public services.
What sets South Dakota apart is its affordability. In addition to no income tax, the state boasts a relatively low cost of living compared to national averages. Residents enjoy a strong sense of community, low unemployment rates, and access to some of the nation’s most beautiful national parks, like Badlands and Mount Rushmore. For those seeking financial freedom without sacrificing quality of life, South Dakota is a top contender.
5. Florida
When you think of Florida, images of sunny beaches, amusement parks, and retirees soaking up the good life probably come to mind. But there’s another reason people flock to the Sunshine State: no state income tax, the James Madison Institute reveals. Florida is a magnet for retirees and remote workers alike, thanks to its favorable tax policies. This tax-free status means more money to spend on enjoying life—whether it’s theme park tickets, a round of golf, or simply relaxing by the pool.
Florida’s economy thrives on a combination of tourism, agriculture, and trade, which allows the state to operate without taxing your personal income. Instead, it relies heavily on sales taxes and property taxes. While property taxes can be higher in certain areas, the lack of state income tax still makes Florida a haven for those looking to save. Combine that with the warm climate and endless recreational activities, and it’s no wonder people from all over the country dream of making Florida home.
6. Texas
Everything’s bigger in Texas, including your take-home pay! According to Tax Foundation, the Lone Star State is famous for its no-income-tax policy, which makes it a haven for those looking to maximize their earnings. Texas has long been a magnet for businesses and individuals thanks to its pro-growth policies, affordable housing options, and thriving economy.
The state compensates for its lack of income tax through property taxes, which can be higher than the national average in some areas. However, the overall savings often outweigh the costs, particularly for those with high incomes. Beyond the financial benefits, Texas offers a rich cultural heritage, diverse cities, and endless opportunities, from tech hubs like Austin to the energy industry in Houston.
7. Washington
Washington State might be known for its lush green landscapes and tech giants like Microsoft and Amazon, but it’s also one of the few states without a personal income tax. For residents, this means keeping more of their hard-earned money to invest, save, or spend as they please.
Instead of taxing income, Washington relies heavily on sales taxes and business taxes to fund state operations. While the state’s cost of living can be higher in urban areas like Seattle, the absence of income tax helps offset these expenses. For those who love outdoor adventures and a progressive, innovation-driven culture, Washington offers the perfect blend of lifestyle and financial freedom.
8. Wyoming
Wyoming’s wide-open spaces, stunning natural beauty, and low population density make it a dream destination for many—but its lack of state income tax is the cherry on top. The state’s economy thrives on energy production, particularly coal, oil, and natural gas, which funds public services without needing to tax personal income.
Beyond the financial perks, Wyoming offers a high quality of life with a low cost of living, minimal traffic, and endless opportunities for outdoor recreation. Whether you’re hiking in the Grand Tetons or enjoying the cowboy culture of Cheyenne, Wyoming lets you live life on your terms, with more money to spare.
9. Why Some States Don’t Tax Income
Now, let’s take a step back and explore why some states choose not to tax personal income. It often comes down to alternative revenue sources. States like Alaska and Wyoming rely heavily on natural resources, while others, like Nevada, use tourism and gaming revenue. These diversified income streams allow states to balance their budgets without taxing their residents’ earnings.
For individuals, this creates an enticing financial benefit, but it’s worth noting that no-income-tax states often rely on higher sales taxes or property taxes to make up the difference. Still, the overall financial advantage for many residents is undeniable.
10. The Trade-Offs
While living in a no-income-tax state sounds ideal, there are trade-offs to consider. For example, many of these states rely on higher sales taxes, property taxes, or specific business taxes to compensate for the lack of income tax. This means that while you might save on one front, you could pay more in other areas.
Additionally, some no-income-tax states have fewer public services or higher costs in sectors like education and healthcare. It’s essential to weigh these factors when deciding if a no-income-tax state is right for you.
11. Who Benefits the Most?
High earners tend to benefit the most from living in a no-income-tax state, as the percentage saved on taxes increases with income. Entrepreneurs, business owners, and remote workers also find these states appealing due to the increased financial flexibility they provide.
However, everyone can enjoy the simplicity of not having to file state income taxes. For retirees, in particular, no-income-tax states offer significant savings, allowing them to stretch their retirement funds further.
12. Is It Worth the Move?
Deciding to move to a no-income-tax state depends on your financial goals, lifestyle preferences, and career opportunities. While the savings on state income taxes can be substantial, it’s essential to consider the full financial picture, including property taxes, cost of living, and available amenities.
For many, the chance to keep more of their hard-earned money is well worth the move. Whether you’re chasing adventure, financial freedom, or a fresh start, no-income-tax states offer a unique opportunity to make your money work harder for you.
