Alaska, Wyoming, and Tennessee carry the lowest overall tax burdens among the states, with residents paying roughly 4.6%, 7.5%, and 7.6% of their income in combined state and local taxes.1Tax Foundation. State and Local Tax Burdens, Calendar Year 2022 The median state sits at about 10.2% and the national average at 11.6%, so all three fall well below the middle. New York anchors the other end at 15.9%, meaning an Alaskan pays roughly a third of what a New Yorker pays on the same income.
Total burden is the honest number because it folds in every state and local charge at once: income, sales, property, excise, vehicle registration, licensing, and the miscellaneous fees that never make headlines. A state can post an eye-catching zero on one line and still cost more than a neighbor with modest rates across the board. Alaska’s position is the extreme example. After the Trans-Alaska Pipeline began generating oil revenue in the late 1970s, the state repealed its personal income tax and started distributing annual dividend checks to residents. Wyoming and Tennessee reach the bottom three by pairing no income tax with moderate property and sales tax rates.
Why No Income Tax Doesn’t Always Mean Low Taxes
Eight states charge no tax on personal earnings: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.2Tax Foundation. State Individual Income Tax Rates and Brackets, 2026 New Hampshire joined outright in 2025 after completing a phased repeal of its interest and dividends tax, which had applied a 3% levy on investment income above $2,400 for individual filers.3New Hampshire Department of Revenue Administration. Repeal of NH Interest and Dividends Tax Now in Effect
Living in one of these states doesn’t mean the state collects nothing from you. Governments lean on other sources to fill the gap. Texas relies heavily on property taxes and sales taxes. Nevada and Florida depend on sales and tourism-related taxes. Alaska funds itself largely through oil revenue, which is why its total burden actually stays low rather than shifting elsewhere. The trade-off matters differently for each household. If you own property, spend heavily on taxable goods, or have most of your income tied up in wages, the same “no income tax” label can produce very different real bills.
Washington is a common source of confusion. It has no traditional income tax on wages, but since 2022 it imposes a 7% tax on the sale of long-term capital assets exceeding a standard deduction of $278,000 in 2025, adjusted annually for inflation.4Washington Department of Revenue. Capital Gains Tax Washington calls it a capital gains excise tax rather than an income tax. For a salaried worker with no significant investment gains, the state functions like a no-income-tax state. For someone selling a business or a large stock position, it doesn’t.
Sales taxes tell a similar story. Five states impose no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.5Tax Foundation. State and Local Sales Tax Rates, 2026 In four of them the absence is uniform. Alaska is the exception: while there is no state-level sales tax, roughly 110 of about 162 Alaskan municipalities levy their own local sales tax ranging from 1% to 7%.6Department of Commerce, Community, and Economic Development Division of Community and Regional Affairs. Sales Tax A purchase in Juneau includes a 5% local tax, while a nearby unincorporated area might charge nothing.
Even states with no general sales tax collect excise taxes on fuel, tobacco, and alcohol that get baked into shelf prices. Gasoline excise taxes run from $0.09 per gallon in Alaska to nearly $0.60 per gallon in California. Cigarette taxes in the five no-sales-tax states range from $1.70 per pack in Montana to $3.33 in Oregon. Heavy drivers or tobacco users see part of the sales-tax savings quietly erased.
Property Taxes Are Where Homeowners Feel It
Property taxes are set locally and vary by county and municipality, so the most useful comparison is the effective rate: what homeowners actually pay as a percentage of a home’s market value. Based on the most recent Census data from 2023, the states with the lowest effective property tax rates are Hawaii at 0.32%, Alabama at 0.36%, Nevada at 0.49%, Colorado at 0.50%, and South Carolina at 0.51%. New Jersey leads the high end at 2.23%, followed by Illinois at 2.07%.7Tax Foundation. Property Taxes by State and County, 2025
The dollar gap is enormous. A home worth $500,000 in Hawaii generates an annual tax bill of roughly $1,600. That same home in New Jersey would owe about $11,150. For homeowners, this single tax can easily dwarf income tax savings from moving to a no-wage-levy state.
Several low-rate states hold their position through assessment caps that prevent tax bills from climbing alongside market values. Those caps protect long-term residents, but they also mean two neighbors with identical homes can pay very different amounts depending on when each purchased. Most states also offer homestead exemptions or reduced rates for owner-occupied primary residences, with qualifications that vary by jurisdiction. These programs typically require you to live in the home as your principal residence for a minimum period each year.
How Retirees Should Read the Map
Retirees face a different tax landscape than wage earners, and the ranking of favorable states shifts accordingly. The eight no-income-tax states automatically exempt all retirement income, including 401(k) distributions, IRA withdrawals, pensions, and Social Security. Several states that do levy an income tax still carve out full exemptions for retirement distributions. Illinois, Mississippi, and Pennsylvania all impose income taxes on wages but fully exempt Social Security benefits, pensions, and retirement account withdrawals. Iowa taxes wages at a flat 3.8% but exempts pension and retirement plan distributions entirely.
Social Security benefits get separate treatment. At the federal level, up to 85% of benefits can be taxable depending on your combined income. Most states either mirror the federal treatment or exempt benefits altogether. As of 2026, eight states still tax Social Security to some degree: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, and Vermont. Most provide deductions or income thresholds that shield lower-income retirees. If your retirement income mixes Social Security, pension, and investment distributions, the state-by-state treatment of each stream matters more than the headline income tax rate on wages.
Estate and Inheritance Taxes Change the Picture for Heirs
Most states impose no estate or inheritance tax, letting assets pass to heirs with only the federal estate tax to consider. About a dozen states and the District of Columbia maintain their own death taxes, and the exemption thresholds are often far lower than the federal level of $13.61 million per individual in 2026. Oregon’s estate tax kicks in at just $1,000,000 in assets. Massachusetts starts at $2,000,000 and Rhode Island at roughly $1,775,000.
Inheritance taxes work differently. Instead of taxing the estate itself, they tax the recipient based on their relationship to the deceased. Kentucky, New Jersey, Pennsylvania, and Maryland all impose inheritance taxes. Close relatives like spouses and children are often exempt or taxed at reduced rates, while more distant relatives and unrelated heirs face steeper percentages. Maryland is the only jurisdiction that imposes both an estate tax, with a $5,000,000 threshold, and an inheritance tax. For families with significant assets, these state-level taxes can create six-figure obligations that don’t exist in most states.
Remote Workers Can Lose the Savings
Moving to a low-tax state doesn’t automatically cut your tax bill if you work for an employer based in a high-tax state. Seven states apply what’s known as the convenience of the employer rule: New York, Pennsylvania, Delaware, Arkansas, Connecticut, Nebraska, and Massachusetts. If you work remotely from your low-tax home state for an employer based in one of these seven, the employer’s state can still claim income tax on your wages. The logic is that you’re working remotely for your own convenience rather than the employer’s necessity, so the employer’s state keeps taxing you as if you still commuted to the office.
The practical result is double taxation. Your home state may also expect a return and a payment on the same income. Some states offer credits for taxes paid to other jurisdictions, but credits don’t always make you whole. Nebraska has softened its approach with a safe harbor: nonresidents who earn less than $5,000 in wages while physically present in Nebraska, or who spend fewer than seven days working there, avoid the state’s filing requirements. Most other convenience-rule states offer no such relief.
Changing Your Tax State Takes More Than a New Address
States distinguish between domicile, the place you intend as your permanent home, and residency, where you physically spend your time. You can be domiciled in one state while qualifying as a statutory resident of another if you maintain a dwelling there and spend enough days present. Getting this wrong means two states claiming you as a taxpayer.
To establish domicile in a new state, the usual factors include registering to vote, obtaining a driver’s license, changing your vehicle registration, updating bank accounts, and spending the majority of your time there. States scrutinize these changes closely during audits, especially when someone moves from a high-tax state to a no-income-tax state. Keeping meticulous records of physical presence, selling or leasing out your former home, and severing financial ties to the old state are the practical steps that hold up under audit.