The States That Don’t Have Income Tax

Texas is the second-largest state in the U.S., and it’s widely known for its “go big or go home” attitude. In fact, Texas’ aversion to income taxes is so strong the ban is listed in the state constitution. Living in a state with no income tax is one strategy for lowering your overall tax burden. Our partners cannot pay us to guarantee favorable reviews of their products or services. Partners are not able to review or request changes to our content except for compliance reasons. Financial products are highly regulated so we work closely with partners to make sure the information we have on our site is accurate and includes any required legal language and disclaimers.

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When Alaska repealed its personal income tax in 1980, it began taxing oil and gas companies at high rates to generate revenue. Arielle O’Shea leads the investing and taxes team at NerdWallet. She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an assigning editor.

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These 9 states have no income tax — that doesn’t always mean you’ll save money

The state ranks 47th in affordability, 48th in cost of living, and 45th in housing affordability. Texas has a 6.25% sales tax, an average local tax rate of 1.95%, and an effective property tax rate of 1.47%. The state ranks 28th in affordability, 29th in cost of living, and 31st in housing affordability.

• But if you’re thinking about relocating for a lower tax bill, be aware that some states that don’t have income taxes levy hefty taxes in other areas.
• For retirees, this means that pension payouts, retirement account withdrawals and Social Security benefits aren’t subject to state taxes.
• Among the states that do have a personal income tax on wages, the tax rates can either be the same percentage of everyone’s income or they can vary depending on how big the person’s paycheck is.
• However, moving to a state without an income tax doesn’t mean that you’ll be excused from paying other taxes.

Texas

Not only is there no income tax in the Last Frontier, but also state law exempts the first $150,000 of assessed property value from property taxes for adults 65 and older. State taxes are often used to generate revenue for services such as health care or to fund infrastructure. Without this revenue stream, some states end up relying more heavily on other taxes, such as property or sales, to recoup the loss.

Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating. Of course, this doesn’t mean that residents of these states don’t pay state taxes, as some of these states still levy taxes on property and sales.

Remote work has made it easier than ever to envision moving without risking job security. But if you were to live in a state with limited opportunities in your industry and lose your job, you could face difficulties securing another one. Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved or otherwise endorsed by these entities. Discover will match all the cash back you’ve earned at the end of your first year.

Arielle has appeared on the “Today” show, NBC News and ABC’s “World News Tonight,” and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. Texas relies on high property taxes to make up for the lost revenue. As a result, it ranks as the eighth-highest state for property taxes overall and second-highest behind Washington for states without income tax. Where New Hampshire falls short is affordability (ranking 42 out of 50) and cost of living (ranking 44 out of 50). FinanceBuzz does not include all financial or credit offers that might be available to consumers nor do we include all companies or all available products. Information, including rates and fees, is accurate as of the publishing date and has not been provided or endorsed by the advertiser.

FinanceBuzz makes money when you click the links on our site to some of the products and offers that we mention. These partnerships do not influence our opinions or recommendations. The credit card offers that appear on this site are from companies from which FinanceBuzz receives compensation such as banks or CardRatings.com. From high-yield savings accounts to cashback checking and sign-up bonuses, we bring you the best banking offers to grow your money smarter. Nevertheless, Texas remains a relatively affordable state due to its lower housing and grocery costs. Gas prices are among the lowest in the U.S. as well, so you can save more on car costs.

• Texas is the second-largest state in the U.S., and it’s widely known for its “go big or go home” attitude.
• In fact, Texas’ aversion to income taxes is so strong the ban is listed in the state constitution.
• It imposes the highest-rate estate tax in the nation and taxes capital gains income for high earners.
• If you lose a job and your local area doesn’t have many gigs in your industry, it might be harder to find new work.

Bella graduated from The University of Oklahoma with a bachelor’s degree in journalism. Despite that, the state’s cost of living index makes it highly affordable, thanks in part to its relatively low housing costs. Theoretically, if everyone moved to the nine states with no income tax, we would all be able to keep more of our hard-earned cash. Keep more of your hard-earned money in these income tax-free states.

The state ranks 39th in affordability, 38th in cost of living, and 40th in housing affordability. Aside from its lack of an individual income tax, Washington is not a tax-friendly state. It imposes the highest-rate estate tax in the nation and taxes capital gains income for high earners. Washington also has one of the highest sales tax rates, with an average combined state and local rate of 9.38 percent.

Sometimes, states with no income taxes do not have the best public services. If you’re trying to determine whether moving to a state with no income tax is financially worth it, start by taking a look at your most recent tax return. Calculate how much you paid in state income taxes (some states have a flat rate, while others have a graduated rate) and determine your effective income tax rate. Then, compare that total with what you would be paying in the state where you wish to move. That said, its effective property tax rate is a relatively low 0.76 percent, and homeowners 61 and older may qualify for a reduction in property taxes if they meet certain income requirements.

Or, if you’re really committed to paying less in taxes, you could move. Perhaps the most critical number to crunch is your cost of living. This includes tallying up the costs of housing (rental or purchase), food, wages, health care and lifestyle. The savings you gain on state taxes might not be worth the extra cost incurred to live comfortably in another state. Say you live in one state but spend a good part of the year in another state.

Wyoming has a 4% sales tax, an average local tax rate of 1.44%, and an effective property tax rate of 0.55%. The state ranks 19th in affordability, 20th in cost of living, and 22nd in housing affordability. Washington has a 6.5% sales tax, an average local tax rate of 2.88%, and an effective property tax rate of 0.76%.