If you’re looking to keep more of your hard-earned money, moving to a state with no income tax could be a smart financial move. Currently, nine states in the U.S. do not charge a state income tax, allowing residents to take home more of their paychecks. But is it really a good deal? Let’s break down these states with no income taxes, the potential savings, and other financial factors to consider before packing your bags.
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Which States Have No State Income Tax?
As of 2024, the following states do not collect individual state income tax:
- Alaska
- Florida
- Nevada
- New Hampshire (Only taxes dividend and interest income, but not wages)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Each of these states compensates for the lack of an income tax in different ways, often through higher sales, property, or other state taxes.
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How Much Money Can You Save?
The amount of money you save depends on your income level and the tax rates in the state you are leaving. Let’s compare potential savings based on a $75,000 and $150,000 salary.
| State with Income Tax | Tax Rate | Tax on $75,000 | Tax on $150,000 |
|---|---|---|---|
| California | 9.3% | $6,975 | $13,950 |
| New York | 6.33% | $4,747 | $9,495 |
| Oregon | 9.9% | $7,425 | $14,850 |
| Illinois | 4.95% | $3,713 | $7,425 |
| Massachusetts | 5% | $3,750 | $7,500 |
| No-Income-Tax States | 0% | $0 | $0 |
For someone earning $75,000, moving to a no-income-tax state could mean saving $3,000–$7,000+ per year. For those making $150,000, the savings could easily exceed $10,000 annually—a substantial financial advantage.
Is Living in a No-Income-Tax State Really Cheaper?
While you may save on state income taxes, other expenses in no-income-tax states can offset those savings. Consider these factors:
- Higher Sales Taxes: States without an income tax often rely on higher sales taxes. For example, Tennessee has a potential sales tax rate of 9.55%, one of the highest in the country.
- Higher Property Taxes: Texas and New Hampshire have some of the highest property tax rates, making homeownership more expensive.
- Cost of Living Differences: Florida and Nevada have booming real estate markets, driving up housing costs.
- Fewer Public Services: Some no-income-tax states may have fewer state-funded programs or higher fees for services.
Who Benefits Most from Moving?
- High-Income Earners: The more you make, the more you save. Business owners, remote workers, and high-income professionals can benefit the most.
- Retirees: Some of these states, such as Florida and Texas, are popular for retirees looking to stretch their retirement savings.
- Entrepreneurs and Business Owners: Many states with no income tax also have favorable tax structures for businesses.
Final Thoughts
Moving to a one of the states with no income taxes can save you thousands of dollars per year, but it’s important to consider the full financial picture before relocating. Weigh the pros and cons, factor in property and sales taxes, and consider the overall cost of living.
