Feeling Taxed to the Max? Check Out These 9 States Boasting Zero Income Taxes

If you’re tired of paying Uncle Sam at the federal level and writing a check to your state every year as well, then let’s look at where you won’t be taxed on your income (but you might have to pay extra bucks in other taxes or home prices).

Alaska

Known as the Last Frontier, Alaska might be the right choice for those looking to escape taxes—and modern life if you head to the remote parts of the state. Indeed, the state of Alaska has the lowest overall tax burden (the average of income tax, property tax, and sales tax), at 4.6%, in the U.S.

Tax facts: Those lucky enough to call Alaska home pay zero individual income tax and state sales tax. However, average property tax rates are higher—1.17%—than the national average of 0.76%.

Home prices: The median list price for a home in Fairbanks, Alaska’s largest city, is $295,900.

The fine print: The 49th state struggles to attract residents, likely due to its remote location, rugged landscape, and extreme weather conditions (including 24/7 daylight in the summer and 24/7 darkness in the winter).

Florida

People might be drawn to the Sunshine State for its average of 237 days of sunshine a year. Or it could be the state’s lack of an individual income tax.

“Florida’s ‘no state income tax’ status also includes no pension income tax or IRA, 401(k), or Social Security taxes,” says Baron Christopher Hanson, a real estate agent at Florida’s Coldwell Banker Real Estate Investment team. “Why pay state taxes on retirement or military pension income and shovel snow for the rest of your life?”

Tax facts: While you will pay zip in state income taxes, Florida does have a 6% state sales tax and an average property tax rate of 0.8%.

Home prices: In Sarasota, a popular place for retirees and families, the median list price is $539,000.

The fine print: Thanks to population growth during the COVID-19 pandemic, Florida has also seen an increase in home prices. In Tampa, for instance, homes are up 3.9% year over year.

Nevada

You don’t have to take a gamble on how much you’ll pay in individual income tax each year in Nevada—the number will always be a goose egg. Instead, most of the state’s revenue comes from its special taxes on gambling.

Tax facts: Residents in the Silver State enjoy one of the lowest property tax rates in the country at 0.48%.

Home prices: “The fact that Nevada has no state income tax attracts many homebuyers,” says Kurt Grosse, a real estate agent with Realty ONE Group in Las Vegas.

And in good news for those buyers: Nevada is among the top 10 states currently seeing the biggest increase in home price reductions. Homes in Las Vegas currently average $424,900.

The fine print: The sunny state ranks at No. 13 for the 15 states with the highest state and local sales tax.

New Hampshire

There are many reasons people choose to move to New Hampshire. They include stunning mountains, easy access to nature, and easy driving distance to several major metropolitan areas (e.g., Boston, New York City, and even Montreal).

But perhaps one of the biggest draws for many new homebuyers is the overall low tax burden, which includes zero state income taxes.

Tax facts: Wondering how much you’ll pay in sales tax in New Hampshire? Try nothing.

Home prices: The median list price in Manchester, one of the Realtor.com® hottest markets, is $368,900.

The fine print: Folks here do have to face the fourth-highest property tax rate—1.77%—in the U.S.

South Dakota

Trying to decide on which Dakota to move to? If you don’t want to shell out money for income tax, pick South Dakota. (Though, its sister state does have one of the lowest income tax rates.)

The state also boasts open spaces and a low cost of living.

Tax facts: On average, residents pay a property tax rate of 1.08%. And the average combined state and local sales tax rate is 6.4%.

Home prices: In the small city of Rapid City, the median list price is $320,000.

The fine print: With no inheritance tax or capital gains tax, the small, unassuming state has recently become a tax haven for the wealthy.

Texas

Texas is now home to more Fortune 500 companies than any other state nationwide. They include Exxon Mobil, Tesla, and HP Inc. And if you work for these all-star companies, you won’t pay any state taxes on your salary.

Tax facts: Homeowners don’t have to pay capital gains tax at the state level.

Home prices: El Paso has ranked among the top 10 housing markets of 2023. The median list price in the border town is $271,000.

The fine print: The Lone Star State has some of America’s highest property taxes, clocking in at 1.60%.

Tennessee

The low cost of living, the thriving economy, and the pleasant weather make Tennessee a popular spot for those looking to relocate.

And the tax burden? Small. The Volunteer State doesn’t levy taxes on residents’ income. That includes earned wages and income from investments, dividends, and interest.

“The fact that we generally have lower housing prices plus no income tax has gained popularity in recent years with the inflationary situation we are in,” says Sheldon Rosengarten, an agent with Marx-Bensdorf Realtors in Memphis.

Tax facts: Residents enjoy a low average property tax rate of 0.71%. However, the state does have a 7% state sales tax and a max local sales tax rate of 2.75%.

Home prices: The Chattanooga housing market is among the top 10 markets positioned for growth in 2023, with a larger share of affordable homes for a median income. The median list price in Chattanooga is $319,900.

The fine print: Beer lovers should be aware that Tennessee also levies the highest beer tax of any state in the country, at $1.29 per gallon.

Washington

The state of Washington doesn’t levy an income tax on residents. But its higher cost of living and housing prices tend to make it an overall pricey (albeit popular) state.

Tax facts: Residents pay a hefty property tax rate of 0.88%.

Home prices: Washington’s second-largest city, Spokane, has a median list price of $411,100. In Seattle, the median list price is almost double, at $799,000.

The fine print: The state levies a business and occupation (B&O) tax, a hotly debated capital gains tax of 7%, which is applied to profits on the sale of long-term assets, including stocks and bonds.

Wyoming

Not only does Wyoming not have an individual income tax, but the state also doesn’t levy a corporate income tax. So if you have a business, Wyoming is a doubly attractive place to call home.

The Equality State also draws in new residents thanks to its low cost of living and the natural beauty of its two national parks: Yellowstone National Park and Grand Teton National Park.

Tax facts: Wyoming boasts one of the lowest property tax rates at 0.56%. The state sales tax is 4%, and the max local sales tax is 2%.

Home prices: The median list price is $350,000 in Cheyenne, $280,000 in Casper, and $249,450 in Gillette. These are the three largest cities in Wyoming.

The fine print: Because Wyoming is such a tax-friendly state, billionaires are moving in. And the rich are pushing up home prices, which is then driving up property tax rates.

Article by Meera Pal on realtor.com

 

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