For millions of Americans feeling the pressure of rising prices, higher rents, and stubborn inflation, the idea of moving to a state with no personal income tax can sound like a financial lifeline. Keeping more of your paycheck each month feels like an instant raise — especially for workers in states where income taxes exceed 5% or more.
But financial experts warn that income tax is only one piece of the affordability equation. While nine states do not tax wages, many of them recover revenue in other ways, including higher property taxes, elevated sales taxes, insurance costs, and rising housing prices.
The result is a complicated reality: living in a no-income-tax state is not automatically cheaper, and for some households, it may actually cost more.
What Does “No Income Tax” Really Mean?
When a state is described as having “no income tax,” it generally means it does not tax earned income, such as salaries, wages, or self-employment earnings. However, that does not always mean residents are completely free from state-level taxes.
Some states still tax:
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Interest and dividends
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Capital gains
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Certain investment income
This distinction matters, particularly for retirees and investors.
The 9 States Without a Tax on Wages
Here are the nine U.S. states that do not levy a tax on earned income:
| State | Income Tax on Wages | Notes |
|---|---|---|
| Alaska | None | No state sales tax; local taxes may apply |
| Florida | None | Popular with retirees; rising housing and insurance costs |
| Nevada | None | Relies heavily on sales and tourism taxes |
| New Hampshire | None | Taxes interest/dividends |
| South Dakota | None | Among the lowest cost-of-living states |
| Tennessee | None | High sales tax |
| Texas | None | High property taxes |
| Washington | None | Taxes capital gains |
| Wyoming | None | Energy-based revenue |
Cost of Living: Where Reality Sets In
A lack of income tax does not eliminate the cost of housing, groceries, healthcare, utilities, or transportation. In fact, some no-income-tax states rank among the most expensive places to live in the country.
Overall Cost-of-Living Rankings
(Lower rank = more affordable)
| State | Cost-of-Living Rank |
|---|---|
| South Dakota | 3 |
| Wyoming | 15 |
| Tennessee | 20 |
| Nevada | 28 |
| Texas | 30 |
| Alaska | 39 |
| Florida | 40 |
| New Hampshire | 44 |
| Washington | 47 |
States such as South Dakota and Wyoming stand out as genuinely affordable. Others, including Washington and New Hampshire, are significantly more expensive than the national average — even without income tax.
Housing Costs Often Offset Tax Savings
Housing is the single largest expense for most Americans, and it plays a decisive role in whether a move saves money.
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Florida has seen dramatic home price increases, particularly in coastal and metro areas, along with surging homeowners insurance premiums.
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Washington faces some of the highest housing costs in the nation, especially near Seattle and surrounding suburbs.
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Texas has experienced rapid population growth, pushing up property values and rental prices in major cities.
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Alaska has limited housing supply and higher construction and energy costs.
For many families, higher housing expenses can erase the financial benefit of not paying income tax.
Property Taxes Can Be a Hidden Burden
States that do not tax income often rely more heavily on property taxes to fund schools and public services.
Property Tax Comparisons
| State | Property Tax Burden |
|---|---|
| Texas | Among highest in U.S. |
| New Hampshire | Very high |
| Florida | Moderate but rising |
| Wyoming | Lower than average |
| South Dakota | Moderate |
For homeowners — particularly retirees on fixed incomes — property taxes can be more financially painful than income taxes.
Sales Taxes Hit Daily Spending
Sales taxes may seem small, but they affect nearly every purchase and disproportionately impact lower- and middle-income households.
Sales Tax Overview
| State | Sales Tax Level |
|---|---|
| Tennessee | Very high |
| Washington | High |
| Nevada | Moderate to high |
| Texas | Moderate |
| Alaska | None at state level |
High sales taxes can quietly drain household budgets over time, especially for families who spend most of their income locally.
Who Actually Benefits Most?
High Earners
Workers with higher incomes often benefit the most from no-income-tax states, as their tax savings are significant and may outweigh other costs.
Remote Workers
Those earning salaries tied to high-cost states while living in lower-cost areas of no-tax states can see substantial gains.
Renters
Renters may avoid property taxes directly, making income-tax savings more noticeable — depending on housing costs.
Who May Not Benefit?
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Retirees on fixed incomes, particularly homeowners
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Lower-income households impacted by sales taxes
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First-time homebuyers facing high prices and insurance costs
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Investors in states that tax capital gains
Is Moving for Tax Reasons Worth It?
Financial planners caution against moving solely for tax benefits. Instead, they recommend evaluating:
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Total tax burden
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Housing affordability
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Healthcare access
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Insurance costs
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Quality of life
What works for a high-income professional may not work for a retiree or young family.
The Bottom Line
Living in a state with no income tax can be financially advantageous — but it is not a guarantee of affordability. In many cases, savings on income tax are offset by higher costs elsewhere.
For Americans considering a move, the smartest approach is to look beyond the paycheck and focus on the full cost of living. A tax-free salary may sound appealing, but true affordability depends on the entire financial picture.
