No Income Tax States

Nine states levy no personal income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. New Hampshire fully phased out its tax on interest and dividend income as of January 1, 2024, joining the true zero-income-tax group.

States without income tax rely on alternative revenue sources to fund roads, schools, public safety and other services. Texas and Nevada collect substantial sales tax revenue—Texas has a base rate of 6.25% (local jurisdictions add up to 2%) and Nevada's combined state-local rate can exceed 8%.

Calculate your current total state and local tax burden, then model the same scenario in the target state. Start with your state income tax paid last year (line 5a on federal Form 1040 for itemized returns).

Each state sets its own residency criteria, but common factors include physical presence, domicile intent and severing ties with your former state. Florida requires you spend more than 183 days per year in the state or maintain a permanent abode and spend any time there.

Do no-income-tax states have lower overall taxes than states with income tax?

Not always. New Hampshire and Texas have high property taxes, and Tennessee and Washington have high sales taxes.

Can I avoid state income tax by moving for part of the year?

Only if you establish bona fide residency in the no-income-tax state and spend the majority of your time there. Splitting time between two states creates risk of dual-residency claims, where both states assert you owe tax.

Do retirees benefit most from no-income-tax states?

Will I owe income tax if I sell my business while living in a no-income-tax state?

You owe no state income tax on capital gains if you are a bona fide resident of a no-income-tax state when the sale closes. You still owe federal capital gains tax.