If you’ve ever looked at your paycheck, filed your taxes, or moved from state to state, you know that income taxes can feel like a heavy drag. But did you know there are U.S. states that don’t charge personal income tax (or are phasing certain taxes out)? In 2025, these states are often looked to as havens for folks who want to keep more of what they earn.
In this post, I’ll walk you through which states have no income tax, how they make up for the shortfall in revenue, what advantages (and trade-offs) that brings, and whether moving to one makes sense for you. I’ve combined research, expert commentary, and a bit of homeowner perspective so you can see both the numbers and the lived experience.
What “No Income Tax” Really Means
First, let’s clarify: “no income tax” doesn’t always mean zero taxes ever. It typically means:
- No state tax on wages and salaries.
- Possibly no tax on interest, dividends, or capital gains — though in some states those taxes are still applied (or are in the process of being phased out).
- No state individual income tax return based on wages.
Also, just because a state doesn’t tax your income doesn’t mean it’s tax-free across the board. Most of these states still levy other taxes: sales tax, property tax, excise, fees, etc. So when thinking about “no income tax,” you have to look at the whole picture.
Which States Have No Income Tax in 2025
As of 2025, there are nine U.S. states that do not impose a general personal income tax on earned wages. These states are:
| State | Notes & Clarifications |
|---|---|
| Alaska | No personal income tax. Also, no state sales tax; some local sales taxes exist. Relies on oil & natural resource revenues among other things. |
| Florida | No state income tax. Popular destination for retirees. |
| Nevada | No income tax. Heavy reliance on sales, gaming, tourism. |
| New Hampshire | As of January 1, 2025, it phased out its tax on interest & dividends, thus no longer taxing those; thus it joins the “no income tax” group. |
| South Dakota | No personal income tax. |
| Tennessee | No tax on wages. It used to tax interest & dividends (the “Hall Tax”), but that has been phased out. |
| Texas | No personal income tax. |
| Washington | No tax on wages. However, note: Washington has a capital gains tax on certain types of income above thresholds. |
| Wyoming | No personal income tax. Very favorable for businesses and individuals. |
So for most people earning a salary, these nine states mean you don’t pay state-level income tax on that paycheck.
How These States Make Up for Lost Revenue
Being a no-income-tax state sounds great in principle, but someone still has to pay for roads, schools, public services, policing, etc. So these states often offset the missing revenue in other ways. Some patterns I noticed:
- Higher Sales Taxes
To raise revenue, many of these states have higher state sales tax or local sales tax. Everyone shopping pays part of it. - Property Taxes Can Be Steep
If you’re a homeowner, property tax might be higher to make up for other taxes being low or missing. - Fees, Excise, and Resource-Based Revenues
Some states like Alaska rely a lot on natural resources (oil, etc.). Others have excise taxes (on fuel, alcohol, gaming), licensing fees, etc. - Local Variations
Even inside a “no income tax” state, different counties or cities may impose their own local sales or other taxes. So what you pay depends a lot on where exactly you live.
Pros + Cons: What You Gain, What You Trade Off
Here’s where things get real: living in a state with no income tax is not automatically “cheaper” or “better” in every way. It depends on your income, lifestyle, housing situation, consumption habits, etc.
| Pros | Cons / Trade-Offs |
|---|---|
| Keep more of your pay — your paycheck won’t have state income tax deductions. Especially helpful for high earners. | Higher sales or property taxes can offset gains. For example, you may pay more on goods, or if you own a home, your property tax burden could be large. |
| Simpler tax filing — no state income tax return for wages in many cases. | Potentially less robust public services (education, infrastructure, healthcare, public transport) if the state has less revenue overall. |
| Good for retirees in many cases — fewer taxes on retirement income if the state doesn’t tax pensions, Social Security, or dividends/interest (depending on the state). | Cost of living can be high in some of these states due to housing, utilities, insurance, etc. Just because you don’t pay income tax doesn’t mean everything else is cheap. |
| Business-friendly in many cases — some states also have no corporate income tax or favorable business climate. | Increased burden on consumption — people who spend more may pay more via sales tax; people who own expensive property may see high property tax bills. |
State Profiles: What It’s Like Living In Some No Income Tax States
To give this some context, let me pull in a few snapshots—what life is like in a couple of these states from what I and others have observed.
- Texas: Huge attraction for folks relocating for job opportunities or affordability. No income tax is a big draw. But property taxes in many parts of Texas are among the highest in the U.S. Also, sales taxes can add up.
- Florida: Sun, beaches, retirees — huge draw. No income tax, no tax on retirement income in many cases. But hurricane risk, insurance cost, and property insurance rates are things people often mention.
- Washington: Great if you hate income tax, but remember Washington has introduced a capital-gains tax for high earners. Also cost of living in Seattle and some urban parts is high.
- Alaska: No income tax or state sales tax (statewide). Beautiful natural environment. But remote in many places, high cost of shipping, limited infrastructure in rural areas.
Is It Really Worth Moving for No Income Tax?
If I were you, considering a move or thinking about relocation, I’d ask these questions:
- What do you earn, and what are your other tax liabilities?
If your income is high, saving state income tax might be substantial. But if most of your costs are in sales tax, property tax, or insurance, gains may be smaller. - Do you own property, or plan to?
If you own (or will), property taxes matter a lot. If you’re renting, you might feel more of the benefit sooner. - How much do you spend on goods or have big purchases?
States with no income tax often recoup through sales or excise taxes, so consumption makes up part of your tax burden. - State value for public services
Schools, roads, emergency services, health care — quality varies greatly. Sometimes high taxes provide better services; sometimes no income tax states still do very well, but you should compare. - Long-term financial implications
Think about what your paycheck saving means over 10-20 years. Also consider retirement, investment income, capital gains, etc. - Local vs state taxes
Even within no income tax states, local jurisdictions may impose taxes, fees, or have high housing costs that affect your real disposable income.
Some Statistics & Comparisons
- According to NerdWallet, the nine states without income tax in 2025 are: Alaska; Florida; Nevada; New Hampshire; South Dakota; Tennessee; Texas; Washington; Wyoming.
- New Hampshire eliminated its tax on interest and dividends effective Jan 1, 2025, bringing it fully into the no-income-tax club.
- States without income tax often show up as more “tax-friendly” for retirees and high-income earners. But combined tax burden (sales, property, other taxes) in some of these states still ends up being moderate or high depending on what you consume and own.
Bottom Line: What To Do With This Information
Here’s what I think: yes, states with no income tax can offer real financial benefits — especially for certain people (high earners, business owners, retirees, etc.). But they’re not magic. The savings are real, but the trade-offs matter.
If I were helping someone decide:
- I’d run a cost-comparison: take your current total tax burden (income tax + sales + property + other fees) and compare to what it might be in a no-income-tax state (including the possible higher taxes elsewhere).
- Consider your lifestyle: Do you make big purchases? Own property? Travel? Use public schools & services heavily?
- Factor in non-tax things: climate, cost of living, insurance, job market, family ties.
Summary: The Key Takeaways
- In 2025, there are nine U.S. states that don’t impose a state income tax on wages: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
- These states make up for the revenue gap via higher sales, property, excise, or industry-specific taxes.
- The benefit of “no income tax” depends heavily on your income level, property ownership, spending, and where in the state you live.
- It can be particularly beneficial for retirees or people with investment or business income.
- But there are trade-offs in services, cost of some goods / housing / insurance, depending on the state.
Also Read: 5 Best States to Live in USA in 2025
