The lowest tax states overall are Alaska, Wyoming, and South Dakota, where residents pay the smallest share of their income toward combined state and local taxes. But the ranking shifts depending on which tax you care about. Nine states charge no personal income tax. Five charge no statewide sales tax. Hawaii has the lowest property tax rate in the country despite being expensive in almost every other respect. The right answer for your household depends on whether you earn a paycheck, spend heavily on goods, own a home, or draw retirement income.
States With the Lightest Overall Tax Burden
Alaska consistently ranks as the lightest-taxed state, with residents paying roughly 4.6% of their income toward all state and local taxes combined.1Tax Foundation. Alaska Tax Rates and Rankings Wyoming and South Dakota round out the top tier. All three benefit from no income tax, modest property taxes, and severance tax revenue from natural resource extraction that offsets what residents would otherwise owe.
Tennessee also performs well despite having one of the highest combined sales tax rates in the country. Its lack of income tax and low property taxes keep the overall burden around 6% to 7.6% of income depending on the methodology used. Florida lands in a similar range thanks to tourism revenue that subsidizes state operations.
The 2026 State Tax Competitiveness Index, which evaluates more than 150 variables across corporate, individual, sales, property, and unemployment insurance taxes, ranks Wyoming first, followed by South Dakota, New Hampshire, Alaska, and Florida.2Tax Foundation. 2026 State Tax Competitiveness Index
One warning worth repeating: Delaware often gets mentioned as a low-tax haven because it has no sales tax. In reality, Delaware’s graduated income tax reaches 6.6% on income above $60,000, and its overall burden is significantly higher than the no-income-tax states.3State of Delaware. Personal Income Tax FAQs No single missing tax makes a state low-tax overall.
States With No Personal Income Tax
As of 2026, nine states impose no personal income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.4USAFacts. Which States Have the Highest and Lowest Income Tax
New Hampshire is the newest addition. The state historically taxed interest and dividend income at 5%, but a phased repeal took full effect on January 1, 2025.5New Hampshire Department of Revenue Administration. Repeal of NH Interest and Dividends Tax Now in Effect Residents there now owe no state tax on any form of personal income.
Washington’s Capital Gains Tax
“No income tax” doesn’t mean “no tax on investment gains” in Washington. Since 2022, the state has imposed a 7% excise tax on the sale of long-term capital assets (stocks, bonds, business interests) when gains exceed a $250,000 standard deduction.6Washington Department of Revenue. Capital Gains Tax Starting in 2025, an additional 2.9% applies to the portion of gains above $1 million.7Washington State Legislature. Chapter 82.87 RCW If you’re sitting on a large stock portfolio or planning to sell a business, Washington’s tax advantage shrinks considerably compared with Florida or Wyoming.
The Texas Constitutional Ban
Texas voters approved a constitutional amendment in 2019 that outright bans a personal income tax. Repealing that ban would require a two-thirds vote in both chambers of the state legislature plus a statewide referendum. For anyone worried about a future legislature changing the rules, Texas offers one of the strongest legal guarantees that income will remain untaxed.
States With the Lowest Sales Taxes
Five states impose no statewide sales tax at all: New Hampshire, Oregon, Montana, Alaska, and Delaware. In these states, the sticker price is generally the price you pay. The exception is Alaska, where local municipalities can levy their own sales taxes even though the state doesn’t, so what you pay at checkout depends on the town.
Among states that do charge sales tax, Colorado’s 2.9% state rate is one of the lowest in the country. The catch is that Colorado cities and counties stack their own taxes on top. A purchase in Colorado Springs carries a combined rate of 8.2% once city, county, and transit authority taxes are added.
Pennsylvania keeps its state rate at 6% but exempts groceries, clothing, and prescription drugs, which significantly reduces the practical impact on everyday spending.8Department of Revenue. Sales, Use and Hotel Occupancy Tax When comparing states, the rate alone can mislead. What matters is whether the tax applies to the things you buy most often.
States With the Lowest Property Taxes
Property taxes hit homeowners every year regardless of income, so a low effective rate compounds into significant long-term savings. Hawaii has the lowest effective property tax rate in the country at about 0.32% of a home’s assessed value.9Tax Foundation. Taxes in Hawaii Alabama comes in at roughly 0.37%, and Colorado at about 0.50%.10Tax Foundation. Property Taxes by State and County On a $400,000 home, the difference between Hawaii’s rate and a high-tax state charging 2% or more works out to nearly $7,000 a year.
Nevada and South Carolina use assessment caps that prevent your tax bill from spiking when local home prices surge. The county and school district still set the final bill, but state law establishes the ceiling.
Homestead Exemptions and Senior Freezes
Even in states with moderate rates, homestead exemptions can shave a meaningful amount off your bill. These programs reduce the taxable assessed value of a primary residence, sometimes by $25,000 and sometimes by $100,000 or more depending on the jurisdiction. You generally need to own and occupy the home as your primary residence, and you usually have to apply rather than receive the exemption automatically.
Senior assessment freezes lock in the assessed value of a qualifying homeowner’s property, so even if market values rise, the taxable value stays flat. Eligibility typically requires the homeowner to be at least 65, occupy the property as a primary residence, and fall below an income threshold. The freeze applies to the assessed value rather than the tax rate, so the total bill can still change if rates increase, but the swings are much smaller. Check with your county assessor. These benefits are easy to miss and rarely applied retroactively.
How Low-Tax States Treat Retirement Income
For retirees, the picture changes. The nine no-income-tax states automatically exempt all retirement income, including pensions, 401(k) distributions, IRA withdrawals, and Social Security benefits. But several states that do tax wages leave retirement income completely alone. Illinois, Mississippi, and Pennsylvania tax paychecks but fully exempt pensions and retirement account distributions. Iowa recently joined this group for residents aged 55 and older.
Social Security Taxation
Most states don’t tax Social Security benefits at all. As of 2026, only eight states apply any state-level tax to those benefits: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Even within this group, most offer income-based exemptions that shield lower- and middle-income retirees. Colorado lets residents aged 65 and older deduct the full amount of federally taxed Social Security. Connecticut exempts benefits entirely for single filers with adjusted gross income under $75,000 and joint filers under $100,000. Utah taxes Social Security to the same extent as the federal government but offers a credit that reduces or eliminates the bill for many retirees.
If your retirement income comes primarily from Social Security and a modest pension, you can live tax-free on that income in more than 40 states.
Estate and Inheritance Taxes Can Undo the Savings
A state that’s cheap to live in isn’t always cheap to die in. About a dozen states and the District of Columbia impose their own estate or inheritance taxes, some with exemption thresholds far below the federal level. Oregon’s estate tax kicks in at just $1,000,000, an amount easily reached by a homeowner with retirement savings. Massachusetts starts at $2,000,000, and Washington at roughly $2,193,000. These thresholds apply even though the federal estate tax exemption sits well above $13 million for 2025 (that figure is expected to drop significantly in 2026 when temporary provisions expire).
Some otherwise low-tax states appear on this list. Washington charges both a capital gains excise tax and a state estate tax, which can add up for someone with substantial investments. Hawaii, despite the country’s lowest property tax rate, levies a state estate tax starting at $5,490,000. If you’re relocating partly to preserve wealth for heirs, check whether your new state has a death tax before you move.
Moving Doesn’t End Your Old State’s Claim on You
Changing your address to a no-income-tax state doesn’t automatically end your tax obligations to your former state. High-tax states aggressively audit former residents who claim to have moved, and losing one of these audits means owing back taxes, interest, and penalties for every year the state considers you still a resident.
The most common trigger is the 183-day rule. Many states treat you as a statutory resident if you maintain a home there and spend 183 days or more within the state’s borders during a tax year. The counting is stricter than people expect. In some jurisdictions, any part of a day spent in the state counts as a full day. A doctor’s appointment, a lunch with a friend, or passing through an airport can all count. The burden falls on you to prove you weren’t present, not on the state to prove you were.
A few states apply their own variations. California doesn’t rely on a bright-line day count at all, instead evaluating a “closest connection” test that looks at where your family lives, where your bank accounts are, and where you spend most of your time. New York counts 184 days and is especially aggressive, with auditors combing through credit card statements, cell phone records, and social media check-ins to establish presence. Illinois ignores day counts entirely and focuses on where you consider your permanent home.
Surviving an audit takes more than a new driver’s license and a forwarding address. Update your voter registration, move your banking relationships, establish local ties like doctors and professional advisors, and track your physical location every day. Auditors have digital tools at their disposal, and vague claims about spending most of your time in Florida won’t hold up against a cell tower record placing you in Manhattan for 200 days.