The Zero Income Tax States
Seven US states levy no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Two additional states — New Hampshire and Washington — tax only investment income (dividends and interest), not earned wages. For workers choosing between states, the income tax difference can be worth $3,000–$15,000+ per year depending on your salary.
But the full picture is more complicated than "zero tax = maximum savings." States have to fund services somehow, and the alternatives — higher property taxes, sales taxes, or fees — can claw back some of the income tax advantage.
Income Tax Savings by Salary Level
| Annual Salary | California Tax | New York Tax | Illinois Tax | No-Tax State | Max Savings |
|---|---|---|---|---|---|
| $60,000 | $3,100 | $3,400 | $2,950 | $0 | $3,400 |
| $100,000 | $6,200 | $6,100 | $4,950 | $0 | $6,200 |
| $150,000 | $11,800 | $9,800 | $7,425 | $0 | $11,800 |
| $200,000 | $17,400 | $13,600 | $9,900 | $0 | $17,400 |
At higher income levels, the savings become dramatic. A couple earning $200,000 moving from California to Texas saves over $17,000 per year in state income tax alone. That's a new car every two years, or an extra $1,450/month toward a mortgage.
What No-Tax States Charge Instead
States without income tax make up the revenue in other ways. Here are the most significant offsets:
- Texas: No income tax, but property taxes average 1.7% — among the highest in the nation. On a $400,000 home, that's $6,800/year in property taxes alone.
- Florida: No income tax, moderate property taxes (about 0.9%), but higher-than-average insurance costs (homeowners insurance, auto insurance) and a 6% sales tax.
- Tennessee: No income tax, low property taxes (about 0.6%), moderate sales tax (7% state rate plus local). One of the most favorable overall tax environments.
- Nevada: No income tax, funded heavily by gaming and tourism taxes. Low property taxes (0.6%). If you don't gamble, Nevada is a strong deal.
- Washington: No income tax on wages, but one of the highest sales taxes in the nation (6.5% state, up to 10.4% with local). Also has a capital gains tax on investment income above $250,000.
The Net Calculation
For most working professionals, no-income-tax states deliver genuine net savings even after accounting for higher property and sales taxes. The break-even analysis depends on your specific spending pattern. A renter in Tennessee saves almost the full income tax amount because property taxes don't directly affect them. A homeowner in Texas with a $500,000 house loses about $4,000 of the income tax savings to higher property taxes — but still comes out ahead at most income levels.
Which No-Tax State Is Best for You
Browse detailed cost breakdowns for cities in all seven no-income-tax states on our city pages. For most people, the deciding factors beyond taxes are job market, climate, and lifestyle fit. Tennessee and Texas offer the broadest combination of affordable cities and growing job markets. Florida is ideal for retirees and warm-weather seekers. Washington is best for high earners in tech who want Pacific Northwest quality of life.
Don't Relocate for Taxes Alone
Tax savings are real and quantifiable, but they shouldn't be the only factor in your relocation decision. A $6,000 annual tax savings means nothing if you take a $15,000 pay cut because the local job market for your field is weaker. Always run the full comparison — salary, taxes, housing, and total cost of living — using our comparison tool before making a move.