If you’re looking to lower your tax bill, you may consider moving to a state with no income tax.
Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming don’t tax personal income. Two other states – New Hampshire and Tennessee – don’t tax wages, though they do tax investment income and dividends.
Here’s a closer look at the nine states that have no income tax and additional state tax information using data from the Tax Foundation.
Alaska
Alaska has no state income tax or sales tax, but it does allow some municipalities to levy sales taxes.
Alaska’s coal mining and oil drilling operations bring in big tax revenues, however. Despite the state’s light tax burden, it is an expensive place to live, mostly because it is so remote.
- State sales tax: None
- State and local property taxes per capita: $2,047
Florida
In the absence of an income tax, Florida relies heavily on sales taxes and property taxes.
Florida is a popular tax and retirement haven, but the cost of living is above average.
- State sales tax: 6%
- State and local property taxes per capita: $1,263
Nevada
Nevada’s treasury collects much of its revenue from above-average sales taxes and fees, much of it gambling-related. Las Vegas, for example, has a combined state, county and city sales tax of 8.25 percent.
- State sales tax: 6.85%
- State and local property taxes per capita: $994
New Hampshire
New Hampshire doesn’t tax wage income and it has no sales tax, but it does collect a 5 percent tax on interest and dividends income that exceeds $2,400 per individual annually, or $4,800 for joint filers.
Some exemptions are available for elderly, blind and disabled residents.
- State sales tax: None
- State and local property taxes per capita: $3,115
South Dakota
Not only does South Dakota not collect income taxes, its sales tax is only 4.5 percent, among the lowest in the country.
But municipalities can collect up to 2 percent on top of that. The state’s Department of Revenue collects a variety of special taxes, such as excise taxes on cigarettes and bank franchise taxes.
- State sales tax: 4.4%
- State and local property taxes per capita: $1,394
Tennessee
Tennessee residents don’t have to pay state taxes on their wages. Tennessee does tax dividends and interest, but that tax, known as the “Hall Tax,” is being phased out and will be eliminated entirely by the 2022 tax year.
The investment tax was 6 percent as the Hall Tax started to phase out, and it will be reduced 1 percent each year through 2020. The investment tax for 2019 is 2 percent, and for 2020 it will be 1 percent.
- State sales tax: 7%
- State and local property taxes per capita: $836
Texas
Texas doesn’t an income tax, but it does levy a state sales tax of 6.25 percent, and local jurisdictions can levy up to 2 percent in additional taxes, for a combined rate of 8.25 percent.
- State sales tax: 6.25%
- State and local property taxes per capita: $1,762
Washington
Washington doesn’t charge an income tax, but it ranks ninth highest in the nation for sales taxes. A 6.5 percent state sales tax combined with city and/or municipal sales-tax rates can combine for a sales tax of potentially more than 10 percent.
- State sales tax: 6.5%
- State and local property taxes per capita: $1,436
Wyoming
In addition to having no personal state income tax, Wyoming levies no corporate income tax. It has a 4 percent sales tax and an average local sales tax of 1.36 percent, for a combined average sales tax rate of 5.36 percent.
- State sales tax: 4%
- State and local property taxes per capita: $2,393
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