"Move to Texas and pay no income tax." You've heard it. But here's what that pitch leaves out: no income tax doesn't mean low taxes. States still need revenue, and they collect it somewhere else — often from your property or your shopping cart. Here's the honest picture for 2026.
The 9 states with no income tax
As of 2026, nine states levy no broad personal income tax on wages:
- Alaska · Florida · Nevada · New Hampshire · South Dakota · Tennessee · Texas · Washington · Wyoming
Two of these come with an asterisk. New Hampshire used to tax interest and dividends, but that tax was fully phased out. Washington taxes wages at 0% but imposes a capital gains tax on large long-term gains — so investors shouldn't lump it in with Florida or Wyoming.
The catch. No state runs without revenue. States that skip income tax make it up through property tax, sales tax, or resource revenue. The label "tax-free" is about one tax, not your total bill.
Where the money comes from instead
| State | Trade-off |
|---|---|
| Texas | Among the highest property taxes in the country. A homeowner can pay the equivalent of an income tax bill. |
| New Hampshire | No income tax and no sales tax — but the highest property taxes of the group. |
| Washington | One of the highest combined sales tax rates, plus a capital gains tax on large gains. |
| Tennessee | Very high sales tax, but low property tax and low cost of living. |
| Alaska | No state income or sales tax; funded largely by oil revenue. But high cost of living. |
| Florida | Moderate property and sales taxes; heavy tourism revenue. Watch insurance costs. |
| Nevada · Wyoming · South Dakota | Low property taxes; revenue from gaming (NV), minerals (WY), and sales tax (SD). |
The other end: highest income tax rates
California has the highest top marginal rate in the nation at 13.3% (12.3% plus a 1% surtax on income over $1 million). Hawaii is next at 11%. At the low end, Arizona and North Dakota top out around 2.5%.
But top rates make headlines, not budgets. Because most states use graduated brackets, your effective rate — what you actually pay divided by what you earn — is usually far below the headline number. A middle-income Californian pays nowhere near 13.3%.
Sales tax: the tax you forget
Sales taxes add up quietly. Louisiana has the highest combined state-and-local rate (over 10%), followed by Tennessee and Washington (around 9.5%). California has the highest state-level rate at 7.25%.
Meanwhile, five states have no state sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. Notice that Oregon has no sales tax but high income taxes — states tend to lean on one lever or the other.
So who actually benefits from moving?
- Renters — you capture the income tax savings without directly paying high property taxes (though some is baked into rent).
- High earners — savings scale with income. The gap between a 13.3% state and a 0% state is real money at high salaries.
- Homeowners in Texas or New Hampshire — do the math first. High property taxes can eat much of the "savings."
- Retirees — no income tax also means no state tax on pensions and retirement withdrawals.
Before you move. States like California and New York audit people who claim to have relocated. Changing your tax home means genuinely establishing residency — where you live, vote, register your car, and keep your permanent home. A mailing address isn't enough.
Compare total tax burden — income + property + sales — not just the headline income tax rate. And factor in cost of living, which often matters more than any tax.
Tax rates and rules change frequently and vary by locality. The figures above reflect 2026 data and may have changed since. This article is general information, not tax advice — for your situation, consult a qualified tax professional or your state's department of revenue.
