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Planning a move to the United States involves many financial decisions, and one of the most consequential is choosing which state to settle in. While federal income tax applies to all US residents and citizens regardless of where they live, state income tax varies dramatically from one state to another, and nine states simply do not charge it. For immigrants in the planning phase, understanding these differences can translate into thousands of dollars in annual savings.
The decision of where to live, however, goes far beyond tax rates. Each state compensates for the absence of an income tax in different ways, and the total cost of living can vary significantly. This guide covers the nine no-income-tax states, their individual tax characteristics, and the factors that should be weighed in any comprehensive financial plan.
State Income Tax
In the United States, taxation occurs at three levels: federal, state, and local. Federal income tax is administered by the Internal Revenue Service (IRS) and applies to the income of all tax residents in the country. State income tax is set individually by each state and may apply to wages, investment income, rental income, and other revenue sources.
State rates range from zero to over 13%, depending on the state and income bracket. The revenue collected funds public services such as education, infrastructure, public safety, and healthcare. States that do not charge income tax generally make up for that revenue through higher rates on other taxes, such as sales tax and property tax.
The Nine Exempt States
As of 2026, nine US states do not charge state income tax on wages and earnings. Each has a distinct economic and tax profile, and the right choice depends on factors beyond the tax exemption itself.
Alaska
Alaska charges neither state income tax nor a statewide sales tax, though some municipalities apply a local sales tax. Residents receive an annual Permanent Fund Dividend (PFD), a payment funded by the state’s oil revenues. The cost of living, however, tends to be higher due to geographic isolation and the added cost of transporting goods to the state.
Florida
A highly popular destination for immigrants, Florida charges no state income tax and offers a diverse job market, particularly in the Miami, Orlando, and Tampa metro areas. The state has a 6% statewide sales tax, with local additions that can push the rate higher. The cost of living varies considerably by region, with coastal cities generally much more expensive than inland areas.
Nevada
With no state income tax, Nevada relies heavily on tourism, entertainment, and the gaming industry to fund public services. The Las Vegas area offers a relatively affordable cost of living compared to other major US metros, though sales taxes are on the higher end and can exceed 8% in some areas.
South Dakota
With an economy rooted in agriculture, tourism, and financial services, South Dakota offers one of the lowest costs of living among no-income-tax states. There is no income tax on any type of earnings, and property taxes are moderate. It is an appealing option for those seeking a quieter lifestyle and lower day-to-day financial pressure.
Texas
Texas is one of the largest economic hubs in the United States, with strengths in energy, technology, healthcare, and manufacturing. Cities such as Houston, Dallas, Austin, and San Antonio offer broad labor markets and established immigrant communities. On the other hand, property taxes are among the highest in the country, which can significantly affect housing costs, particularly for homeowners.
Tennessee
Tennessee does not tax wages. The former tax on interest and dividends, known as the Hall Income Tax, was fully eliminated, making the state free from any state-level personal income tax. The cost of living is generally below the national average, and cities such as Nashville have attracted growing investment and employment opportunities.
Washington
The state of Washington does not tax wages, but in 2022 it introduced a tax on long-term capital gains above a certain threshold, an important exception to consider for investors. Cities such as Seattle have a high cost of living, with rents and home prices among the most expensive in the country. Sales taxes are also above the national average.
Wyoming
Sparsely populated and with strong appeal to those who value the outdoors, Wyoming charges no state income tax and maintains one of the lowest overall tax burdens in the United States. The economy is based on mining, tourism, and agriculture. The cost of living is moderate, though employment options may be more limited compared to more urbanized states.
New Hampshire
New Hampshire does not tax wages. The former tax on interest and dividends was fully eliminated in January 2025, making the state completely free of personal income tax. There is also no state or local sales tax, which is a significant advantage. However, property taxes are among the highest in the country, a relevant factor for anyone planning to purchase a home.
Tax Trade-Offs
It is essential to understand that no income tax does not mean no taxation. States make up for that lost revenue in various ways, and knowing them is critical to calculating the true cost of living in each location.
- Sales tax: can exceed 9% in some localities, applying to most everyday purchases of goods and services
- Property tax: can be significantly higher than the national average, particularly in states like Texas and New Hampshire
- Local taxes and fees: include vehicle fees, business licenses, and other municipal charges that vary by city and county
- Capital gains taxes: as in Washington, which taxes long-term capital gains above a certain threshold even without a wage income tax
Strategic Financial Planning
Choosing a no-income-tax state can increase your take-home pay, but that decision should be evaluated within the full financial picture. A professional earning $100,000 per year in a state with a 5% income tax would pay roughly $5,000 more in state taxes. However, if that state offers significantly lower housing, transportation, and living costs, the real savings may still exceed those of a no-income-tax state with a high cost of living.
For immigrants in the planning phase, other factors must weigh in: availability of jobs in your field, presence of an immigrant community, school quality, access to healthcare, climate, and transportation infrastructure. The best choice is one that balances tax savings with quality of life and professional opportunities.
Analyzing the full tax picture, including federal, state, local, sales, and property taxes, is essential for making an informed decision. Online cost-of-living comparison tools for cities and states can be valuable allies in this process, helping you project a realistic budget for each location before committing to the move to the United States.
Victoria Harper
Editor-in-Chief
Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.
