No income tax states: free lunch or just a different menu?

By Tom, CPA · Updated October 25, 2026

TL;DR: As of October 2026, nine states have no broad tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Washington taxes large capital gains and plans a high-income tax from 2028. All of them collect money another way, usually through sales or property taxes, so compare your total bill, not just the income tax line.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

"Move to a no income tax state" is the FIRE equivalent of "just eat less and exercise more." Technically correct, wildly incomplete. States still need to pay for roads, schools and the occasional statue of a giant fiberglass fish. If they don't tax income, they tax something else.

For early retirees, the math is especially quirky. Your income in retirement may be low and flexible, so a state income tax might cost less than you think, while property taxes and insurance hit no matter what your income is. This guide lists the states, explains what replaces the income tax, and gives a comparison table.

CPA Warning Label: Zero income tax may cause sudden interest in property tax assessments and hurricane insurance quotes.

The verified list of states

As of October 2026, these states do not tax wages or ordinary retirement income at the state level:

• Alaska repealed its individual income tax in 1980 and has no statewide sales tax, though many localities levy one.
• Florida has no personal income tax and relies heavily on sales tax (6% state plus county surtaxes).
• Nevada has no personal income tax; state sales tax is 6.85% before local additions.
• New Hampshire never taxed wages, and its Interest and Dividends Tax was repealed for tax periods beginning on or after January 1, 2025.
• South Dakota has no personal income tax; state sales tax is 4.2%, plus municipal sales taxes in most cities.
• Tennessee repealed the Hall tax on investment income starting January 1, 2021.
• Texas has no personal income tax and leans on property and sales taxes.
• Washington has no tax on wages, but taxes long-term capital gains above a large standard deduction (7%, plus 2.9% on gains above $1 million) and has enacted a 9.9% tax on income over $1 million starting January 1, 2028.
• Wyoming has no individual income tax; state sales tax is 4% plus local options.

State law changes often. Check each state's revenue department before you move, especially Washington.

Taxes that replace income tax

States make up the revenue in a few ways:

• Sales taxes. Tennessee's combined rates are among the highest in the country (7% state plus local up to 2.75%), though groceries are taxed at a lower 4% state rate.
• Property taxes. Texas is the classic example: no income tax, but property taxes that make new arrivals spill their sweet tea. Homestead exemptions soften this for owner-occupants, and Texas gives extra exemptions to homeowners 65 and older.
• Resource and tourism money. Alaska (oil), Wyoming (minerals) and Nevada (tourism and gaming) collect a lot from industries and visitors.
• Targeted taxes. Washington's capital gains tax and estate tax, and the coming tax on income above $1 million, show that "no income tax" can become "no income tax for most people."

A spender's sales tax bill grows with spending, while a frugal retiree pays little. That's why Frugal Fran loves sales-tax states and Lavish Larry is quietly furious about the tax on his third jet ski.

Property and sales taxes

For homeowners, property tax is the line that matters most, and it doesn't care about your income. Questions to ask about any target county:

• What is the effective rate on a home like the one you'd buy, after the homestead exemption?
• Is there a cap on how fast your assessed value or tax bill can rise? Florida's Save Our Homes caps assessment growth on homesteads at the lesser of 3% or CPI (2.7% for 2026). Nevada caps tax bill increases on a primary residence at 3% a year.
• Are there senior exemptions or freezes, and what are the age and income rules? Tennessee's 2026 tax relief program, for example, requires age 65+ and income of $38,470 or less.
• What will homeowners insurance cost? It isn't a tax, but in coastal areas it can rival one.

Renters pay property tax too, just indirectly through rent.

Health care access

Taxes are not the only line in an early retiree's budget. Before age 65, health insurance is often the biggest. Things to compare:

• Marketplace options. The number of insurers and plan prices vary by county. Rural areas may have one insurer and high premiums. Use HealthCare.gov or the state exchange to price plans at your expected income.
• Medicaid rules. States differ on Medicaid expansion, which matters if your taxable income is very low in early retirement. See the Medicaid gap for early retirees.
• Doctors and hospitals. Distance to specialists matters more as you age.

A low-tax state with expensive premiums or no nearby hospital may cost more overall.

Comparison table

Rates as of October 2026 from each state's official sources. Local rates vary.

Illustration: income tax vs. property tax

Illustration. Hypothetical numbers only. A married early-retiree couple spends $70,000 a year and owns a $400,000 home.

• In State A, a flat 4% income tax applies to their taxable income after state deductions. They manage withdrawals so taxable income is $40,000, so state income tax is about $1,600. Property tax at an effective 1% is $4,000. Total: about $5,600.
• In State B, no income tax, but the effective property tax is 2% after exemptions: $8,000. Total: $8,000, plus somewhat higher sales tax.

The "tax-free" state costs more in this example. Swap in a $250,000 home or $150,000 of taxable income and the answer flips. Run your own numbers with the state tax move calculator.

Moving the right way

If you do move, make it real. States you leave may keep taxing you if you keep a home there, spend lots of time there or never cut ties. Change your driver's license, voter registration, vehicle registration and mailing address, and keep records of where you spend your days. Selling a business or realizing big gains right before a move can draw scrutiny. See changing state tax residency.

Also time the move with your income. Many early retirees do Roth conversions or harvest gains in their lowest-income years. Doing them after you've established residency in a no income tax state can save state tax that would otherwise apply, but only if the move is genuine and documented. A rushed move made just to dodge one big transaction is exactly what auditors in high-tax states look for.