The Nine No-Income-Tax States
Alaska, Florida, Nevada, New Hampshire (dividends and interest only), South Dakota, Tennessee, Texas, Washington, and Wyoming impose no state income tax on wages. This can save workers thousands of dollars annually — but the full financial picture is more nuanced than the tax rate alone.
Actual Tax Savings by Income Level
| Annual Income | Moving from CA (13.3% top) | Moving from NY (10.9%) | Moving from IL (4.95%) |
|---|---|---|---|
| $50,000 | Save ~$2,200 | Save ~$2,800 | Save ~$2,475 |
| $100,000 | Save ~$5,800 | Save ~$5,500 | Save ~$4,950 |
| $200,000 | Save ~$15,600 | Save ~$14,200 | Save ~$9,900 |
| $500,000 | Save ~$52,000 | Save ~$42,500 | Save ~$24,750 |
Note: These are approximate effective savings, not marginal rate calculations. Actual savings depend on deductions, filing status, and other factors.
The Pros
- Immediate savings — every paycheck is larger from day one
- Retirement income advantage — Social Security, 401(k) withdrawals, and pension income are not taxed at the state level
- Investment income advantage — capital gains, dividends, and interest are tax-free at the state level
- Psychological benefit — simpler state tax filing and a sense of keeping more of what you earn
The Cons (What They Do Not Tell You)
- Higher property taxes — Texas property taxes average 1.6% vs. California's 0.7%. On a $400,000 home, Texas charges $6,400/year more.
- Higher sales taxes — Tennessee and Washington have sales taxes above 9%. This hits low and middle-income earners hardest.
- Lower government services — no-income-tax states often have less-funded public schools, roads, and social services
- Insurance costs — Florida's homeowner's insurance averages $4,200/year, the highest in the nation
- Hidden fees — higher vehicle registration fees, toll roads, and service charges make up some revenue
Who Benefits Most From Moving?
The tax savings are largest for:
- High earners ($200K+) — the savings scale dramatically with income
- Retirees — avoiding state tax on Social Security and retirement withdrawals
- Remote workers — earning a high-tax-state salary while living in a no-tax state
- Business owners — pass-through income avoids state taxation
For median earners ($50,000–$75,000), the income tax savings of $2,000–$4,000/year can be fully offset by higher property taxes, sales taxes, or insurance costs. Always calculate the full tax picture before moving.