Several U.S. states function as tax havens in the US by offering no personal income tax, corporate-friendly statutes, perpetual trust laws, or anonymous business entity formation. Nine states charge no income tax at all. Delaware dominates corporate registrations. South Dakota leads on trusts. Wyoming leads on LLC privacy. Each advantage is legal when used as intended, and each has limits the marketing rarely mentions.
The Nine States With No Personal Income Tax
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming impose no tax on personal income. New Hampshire is the newest to the list. It had long taxed interest and dividends while exempting wages, but House Bill 2, signed in 2023, repealed the interest and dividends tax effective January 1, 2025.1NH Department of Revenue Administration. Repeal of NH Interest and Dividends Tax Now in Effect As of 2026, New Hampshire residents pay no state income tax of any kind.
These states still need revenue, and they collect it elsewhere. Most rely on higher sales taxes, property taxes, and excise taxes on gasoline and tobacco. Nevada pairs its lack of income tax with a combined state and local sales tax rate averaging above 8%. New Hampshire takes the opposite approach: no sales tax either, but heavy property taxes. Relocating to a no-income-tax state can produce real savings, but those savings shrink once you total what the state charges on everything else.
What No-Income-Tax States Charge Businesses Instead
Nevada, Ohio, Texas, and Washington skip the corporate income tax but impose gross receipts taxes on businesses operating within their borders.2Tax Foundation. State Corporate Income Tax Rates and Brackets, 2026 A gross receipts tax applies to total revenue rather than net profit, so a company owes it regardless of whether the year was profitable. No deductions for labor, materials, or overhead.
Nevada’s Commerce Tax kicks in once a business exceeds $4 million in gross revenue, with rates ranging from 0.051% to 0.331% by industry. Washington’s Business and Occupation Tax works similarly, taxing gross income at rates that vary by classification. Ohio’s Commercial Activity Tax charges 0.26% of taxable receipts after a statutory exemption. Texas calls its version a franchise tax, applying it to business margin in a way that functions like a gross receipts levy.
For businesses with thin margins, this structure can be harsher than a traditional income tax, because there is no way to offset the bill against losses. High-margin, low-overhead companies benefit the most.
Delaware for Corporations
More than a million business entities are registered in Delaware, and the reason has more to do with law than tax rates. Delaware does impose a corporate income tax, but its code exempts income from intangible assets held by Delaware holding companies. A corporation can set up a subsidiary in Delaware to hold patents, trademarks, or copyrights, then have its operating companies in other states pay royalties for using that intellectual property. The royalty payments are deductible where they are paid, while Delaware collects no tax on the royalty income received. The net effect is a lower overall state tax bill.
This arrangement, widely known as the Delaware Loophole, has weakened over time. Roughly half the states with corporate income taxes now use combined reporting rules that force related entities to file a consolidated return, or addback statutes that disallow deductions for payments to affiliated holding companies. In states without those countermeasures, the strategy still works.
The Court of Chancery
Delaware’s deeper draw is judicial. The Court of Chancery handles matters in equity, a jurisdiction that covers corporate governance disputes, fiduciary duty claims, and shareholder rights cases.3Delaware Code Online. Delaware Code 10 – Court of Chancery Cases are decided by experienced judges rather than juries, and decades of precedent give companies and their lawyers a predictable framework for resolving disputes.4Delaware Courts. Court of Chancery For many enterprises, that predictability is worth more than any tax break.
The Cost of Being a Delaware Corporation
Delaware charges an annual franchise tax on every corporation formed there, regardless of where it actually operates. The minimum is $175 under the authorized shares method or $400 under the assumed par value capital method, and the maximum is $200,000 per year.5Division of Corporations – State of Delaware. How to Calculate Franchise Taxes Companies owing $5,000 or more must make quarterly estimated payments starting in June. For a small business that formed in Delaware for name recognition, franchise tax plus a registered agent (typically $49 to $300 per year) plus foreign-entity registration in the state where the business actually operates can add up to more than any tax it saves.
South Dakota for Trusts
South Dakota has become one of the world’s leading trust jurisdictions by combining three features few other states match: no state income tax on trust income, no limit on how long a trust can last, and strong secrecy protections. Hundreds of billions of dollars in trust assets are now managed in the state.
Dynasty Trusts With No Time Limit
Most states historically limited trust duration to roughly 90 years under the common-law Rule Against Perpetuities. South Dakota abolished that rule entirely.6South Dakota Legislature. South Dakota Code 43-5 – Restraints on Alienation of Property A dynasty trust created in South Dakota can last indefinitely, passing wealth from generation to generation without the assets being included in any beneficiary’s taxable estate. When the trust’s creator allocates their generation-skipping transfer tax exemption to the trust at funding, distributions to grandchildren, great-grandchildren, and beyond remain free of both estate tax and generation-skipping transfer tax.
Sealed Court Records
South Dakota seals trust-related court records by statute. The trust instrument, inventories, fiduciary reports, petitions, and court orders are kept out of the public record and made available only to the court, the trustor, fiduciaries, beneficiaries, and their attorneys.7South Dakota Legislature. South Dakota Codified Law 21-22-28 – Protection of Privacy, Sealing and Availability of Documents Other parties can access the records only by petitioning the court and showing a specific need.
Directed Trusts and Decanting
South Dakota’s directed trust statute lets families split trust management among specialized advisors. The trust instrument can assign investment decisions to an investment trust advisor, distribution decisions to a distribution trust advisor, and tax decisions to a tax trust advisor, each operating independently of the trustee who holds legal title.8South Dakota Legislature. South Dakota Codified Law 55-1B – Directed Trusts A family can keep control over investment strategy and distributions while using a South Dakota corporate trustee for administrative and legal purposes.
If circumstances change, South Dakota’s decanting statute lets a trustee move assets from an existing trust into a new trust with different terms, without going to court for approval.9South Dakota Legislature. South Dakota Codified Law 55-2-15 – Trustee Authorized to Distribute From First Trust to Second Trust A trust drafted 30 years ago can be updated for new tax laws, family dynamics, or investment goals. That flexibility is what makes multi-generational trusts practical over long horizons.
Wyoming for Anonymous LLCs
Wyoming attracts business owners who prioritize privacy. The state’s LLC formation statute requires only the company’s name and the name and address of its registered agent in the articles of organization. Members, managers, and ownership percentages appear in no public filing.10Wyoming Secretary of State. Wyoming Limited Liability Company Act The Close LLC designation offers an even simpler management structure for small or family-owned businesses.
Wyoming’s asset protection is among the strongest in the country. When a creditor wins a judgment against an LLC member personally, the creditor’s only remedy is a charging order against the member’s distributional interest. The creditor cannot seize the LLC’s assets, force a sale of the business, or compel a distribution. Wyoming’s statute makes this the exclusive remedy even when the debtor is the sole member, a protection several other states do not extend to single-member LLCs.11Justia. Wyoming Code 17-29-503 – Charging Order
The privacy is real at the state level. It is not privacy from the federal government. Every LLC with employees or that elects corporate tax treatment needs an Employer Identification Number, and federal income tax returns require disclosure of members and their shares of income. Wyoming shields ownership from casual public searches, not from IRS enforcement.
Why Foreign Money Comes to the United States
The U.S. occupies an unusual position globally. It demands extensive financial reporting from its own citizens worldwide but shares relatively little information about foreign nationals who park money in American banks.
The Foreign Account Tax Compliance Act requires foreign financial institutions to report information about accounts held by U.S. taxpayers or face a 30% withholding tax on certain U.S.-source payments.12Office of the Law Revision Counsel. 26 USC 1471 – Withholdable Payments to Foreign Financial Institutions FATCA runs one direction. Banks around the world report American account holders to the IRS, but the U.S. has not joined the Common Reporting Standard, the multilateral framework under which over 100 countries automatically exchange financial account information with one another. A wealthy individual from Brazil or Germany can open an account at a U.S. bank and face no automatic disclosure to their home country’s tax authority. That gap has led international organizations to label the United States one of the world’s largest havens for foreign capital.
The Corporate Transparency Act in 2026
Congress passed the Corporate Transparency Act in 2021 to combat anonymous shell companies by requiring businesses to report their beneficial owners to the Financial Crimes Enforcement Network. The statute, codified at 31 U.S.C. ยง 5336, set penalties of up to $500 per day in civil fines and up to $10,000 in criminal fines (plus up to two years’ imprisonment) for willful violations.13Office of the Law Revision Counsel. 31 USC 5336 – Beneficial Ownership Information Reporting Requirements
The law’s reach has since been dramatically curtailed. In March 2025, FinCEN published an interim final rule exempting all entities created in the United States from the beneficial ownership reporting requirement. Only foreign-formed entities registered to do business in a U.S. state must now file. FinCEN also announced it will not enforce penalties or fines against U.S. citizens or domestic companies.14Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting The statute remains on the books, and a future administration could reverse the exemption through rulemaking, but as of 2026, domestic companies face no federal obligation to disclose their owners to FinCEN.
Where Legal Planning Becomes Evasion
Everything in this article is legal tax avoidance: using the tax code’s own provisions to reduce what you owe. The IRS draws a clear line between avoidance and evasion. Avoidance means taking lawful steps to minimize your tax liability. Evasion means hiding income, lying on a return, or deliberately underpaying. Evasion is a federal felony punishable by up to $100,000 in fines and five years in prison, or up to $500,000 for a corporation.15Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax
Between the two sits the economic substance doctrine. The IRS can disallow the tax benefits of any transaction whose only real purpose is reducing taxes without changing the taxpayer’s economic position in any meaningful way. Codified in federal law, the doctrine requires that a transaction both alter the taxpayer’s economic position apart from tax effects and serve a substantial non-tax business purpose. Paper structures that shuffle income between entities but accomplish nothing else are what it targets.
Forming a Delaware holding company, funding a South Dakota dynasty trust, or creating a Wyoming LLC are all lawful. Using those entities to hide income the IRS is entitled to know about, or creating arrangements whose only purpose is obscuring taxable transactions, converts planning into a criminal matter. These structures work when they reflect genuine business decisions. They fall apart when the only honest answer to “why did you do this?” is “to pay less tax.”