Tax Planning

States With No Income Tax in 2025: A Complete Guide

  • Author Written by The Nestmann Group
  • Reviewed by Brandon Roe
  • Calendar Updated: May 6, 2025
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Nobody likes paying taxes, and state income tax can take a big bite.

It feels even worse when you move outside the US but have to keep paying in your home state without using any of the services there.

That’s why – as part of many engagements where clients are looking to move overseas – they also ask us to change their registered home state in the US.

Most of the time, that means to a state that doesn’t charge any income tax at all.

Now if you fall into the same boat – or even if you’re just looking to keep more of what you earn and are willing to move within the country – keep on reading.

In this guide, we’ll look at which states don’t have income tax, the good and bad points about living in these states, what to think about when moving to one, and how to properly leave a high-tax state like California to avoid tax problems.

The Eight States with No Income Tax in 2025

As of 2025, these eight places don’t charge any state income tax:

  1. Alaska.
  2. Florida.
  3. Nevada.
  4. New Hampshire (just joined this list in January 2025 after getting rid of its tax on interest and dividends).
  5. South Dakota.
  6. Tennessee.
  7. Texas.
  8. Wyoming.

These states pay for their government in other ways, like through sales taxes, property taxes, or, in Alaska’s case, money from oil.

It’s worth noting that Washington State does impose a 7% capital gains tax on the portion of gains exceeding its $270,000 deduction, but doesn’t tax regular income from work.

How Much Money Can You Save?

An example: if you make $100,000 a year, living in a state with no income tax instead of one with, say, a 5% tax rate, you get to keep an extra $5,000 each year. Over ten years, that’s $50,000 – money you can invest, save, or use to improve your life.

The savings get even bigger for people with higher incomes. For example, someone earning $500,000 a year in California—where the top marginal tax rate on that income is 11.3%—could pay over $45,000 in state income taxes annually. Moving to a state with no income tax could eliminate that burden entirely.

Good and Bad Points About Living in States with No Income Tax

The Good Stuff

  • More money in your pocket: The most obvious benefit – you keep more of what you earn.
  • Easier tax filing: No state income tax forms to fill out each year.
  • Building wealth faster: The money you save on taxes can be invested and grow over time (dependent on how else the state is making money from you).
  • Protection from future tax hikes: As states need more money, you won’t face higher income taxes (but you may face other taxes and fees as a result).
  • More financial privacy: One less government agency looking at your finances.
  • Great for retirees: Helps stretch your retirement savings further.
  • Less government red tape: These states typically have fewer regulations on business and personal matters.
  • Better for business owners: Running a business (especially pass-through entities) costs less without state income taxes.

The Not-So-Good Stuff

  • Higher taxes in other areas: These states often charge more in sales taxes, property taxes, or other fees, increasing the average costs of living. Texas, for instance, has some of the highest property tax rates in the US, with effective rates ranging from 1.6% to 1.8% in cities like Austin and Dallas.
  • Possibly fewer public services: Less tax money might mean fewer government services.
  • Housing can be expensive: Popular places like parts of Florida may have higher real estate costs.
  • State budgets can be less stable: Without income tax, state budgets might swing more during economic changes.
  • Natural disaster risks: Several no-tax states (Florida, Texas) face hurricane and flooding risks, which affect insurance costs.
  • Growing too fast: The tax advantage has drawn lots of people to some areas, causing potential traffic and infrastructure problems.
  • Different culture: Moving from a high-service state to a limited-government state may require getting used to different expectations.

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A Quick Look at Each No-Income-Tax State

Alaska

  • How they pay for government: Oil money, investment earnings from the Alaska Permanent Fund.
  • Other taxes: No state sales tax (though some local sales taxes exist).
  • What it’s like: Very cold winters, amazing nature, remote living.
  • Cool fact: Alaska residents get a yearly payment from the Permanent Fund.

Florida

  • How they pay for government: Sales tax, tourism money, property taxes.
  • Other taxes: 6% state sales tax, property taxes vary by county (counties can levy a discretionary sales surtax ranging from 0.5% to 2.5%).
  • What it’s like: Warm weather year-round, beaches, hurricane risk.
  • Cool fact: Popular retirement spot with strong laws protecting your assets. Florida offers a very high homestead exemption, which protects a primary residence from a variety of creditors.

Nevada

  • How they pay for government: Gambling/casino tax, sales tax, tourism.
  • Other taxes: High sales tax (8.375% average combined rate in some areas, like Clark County), low property taxes.
  • What it’s like: Desert climate, entertainment options, tourism centers.
  • Cool fact: Las Vegas and Reno offer city amenities in an otherwise rural state.

New Hampshire

  • How they pay for government: Property taxes, business profit taxes, fees.
  • Other taxes: One of the highest property tax rates in the nation, no sales tax on most items.
  • What it’s like: Four distinct seasons, outdoor recreation, New England character.
  • Cool fact: Just recently became a full no-income-tax state in January 2025.

South Dakota

  • How they pay for government: Sales tax, property tax, business fees.
  • Other taxes: 4.5% state sales tax, property taxes (average effective property tax rate of 1.01%).
  • What it’s like: Rural, farming-focused, cold winters.
  • Cool fact: Very easy to establish residency with minimal time required in the state.

Tennessee

  • How they pay for government: High sales tax, property taxes.
  • Other taxes: Highest average state + local sales tax rate in the US (9.55%).
  • What it’s like: Southern culture, music heritage, mild seasons.
  • Cool fact: Used to tax investment income but phased it out completely by 2021.

Texas

  • How they pay for government: Sales tax, property tax, oil and gas revenue.
  • Other taxes: High property taxes, 6.25% state sales tax on all retail sales, leases, and rentals of most goods. Local jurisdictions can levy an additional 2% sales and use tax.
  • What it’s like: Diverse geography, hot summers, strong economy.
  • Cool fact: Offers everything from major cities to rural areas.

Wyoming

  • How they pay for government: Mineral extraction taxes, sales tax, tourism.
  • Other taxes: Relatively low property taxes, 4% state sales tax (local jurisdictions can also levy an additional 2% tax here).
  • What it’s like: Mountain west, outdoor activities, few people.
  • Cool fact: One of the most tax-friendly states overall.

Moving to a No-Income-Tax State the Right Way

If you’re thinking about moving to a state without income tax, doing it properly is crucial. Half-measures or poor planning can mean you’ll still owe taxes in your old state.

Here’s what you need to know.

Understanding Domicile vs. Residency

Your domicile is your permanent legal home – the place you intend to return to after being away. You can only have one domicile at a time.

Your residency is often determined by how much time you spend in a place, like being in a state for more than 183 days in a year.

Most tax fights happen over domicile, because it’s more about your intentions than just counting days.

Basic Steps to Establish Residency

  1. Get a place to live: Buy or rent a home in your new state.
  2. Get a driver’s license in your new state: Turn in your old license when you do this.
  3. Register to vote in your new state: Cancel your voter registration in your former state.
  4. Update your vehicle registration and insurance.
  5. Change your address with the post office, banks, and the IRS (using Form 8822).
  6. Update your legal documents: Make sure your will, trust, power of attorney, and healthcare directives follow your new state’s laws.
  7. Build local connections: Open local bank accounts, join community groups, find local doctors.
  8. Keep good records: Save moving expenses, real estate paperwork, and other proof of your move.
  9. File a part-year or nonresident tax return in your former state for your final year there.

Looking at Two Popular Options

Different no-tax states have different requirements for establishing residency.

Here’s a comparison of two popular choices among our clients.

Texas Approach:

  1. Get a physical address: Either buy property, sign a lease, or use services like Escapees RV Club that provide valid street addresses.
  2. Get a Texas driver’s license: Bring your passport, out-of-state license, and two Texas residency documents less than 90 days old.
  3. Register your vehicle: This requires a Texas vehicle inspection, so you’ll need to bring your car to Texas.
  4. Register to vote: You can do this when getting your driver’s license.
  5. Update all your addresses with banks, investment firms, and government agencies.
  6. Spend meaningful time in Texas: There’s officially no minimum requirement, but physical presence strengthens your case. 30 days is a good number to keep in mind.
  7. Build local connections: Set up banking, healthcare, and other services in Texas.

Why Texas works well: Generally seen as a “normal move” (as compared to one motivated purely for tax reasons). Comes with a lower audit risk.

South Dakota Approach:

  1. Set up a mail forwarding address: Services like DakotaPost provide physical street addresses that qualify for residency.
  2. Stay one night in South Dakota: Keep the receipt as proof you were physically there.
  3. Get a South Dakota driver’s license: Bring ID, Social Security number, your hotel receipt, a completed residency affidavit, and two pieces of forwarded mail.
  4. Register your vehicle: No inspection required. Simply provide proof of ownership, insurance, and your South Dakota address.
  5. Register to vote (optional): Note that new rules require 30 consecutive days of residence before voting eligibility.
  6. Update all your addresses with financial institutions and government agencies.
  7. Build local connections when possible.

Why South Dakota works well: Minimal physical presence required (one night every five years) and a streamlined process designed for RVers and travelers.

Leaving a High-Tax State Properly

Just as important as setting up in your new state is properly leaving your old one – especially if you’re leaving a state known for aggressive tax collection like California, New York, or Massachusetts.

Steps for a Clean Break

Mark your departure date: This is when you stop being a tax resident of your old state.

Complete all the steps for establishing residency in your new state.

Cut ties with your former state:

  • Turn in your driver’s license.
  • Cancel voter registration.
  • Close local bank accounts.
  • Sell your home or turn it into a rental investment.
  • Remove homeowner tax breaks.
  • Transfer professional licenses.
  • Change the address on all accounts and legal documents.
  1. File a final part-year or nonresident tax return in your former state.
  2. Include a clear statement about your move with your final tax return.
  3. Limit time in your former state, especially during the first 1-2 years after moving.
  4. Keep good records of your move and new life in your new state.
Additional Considerations
  • Income sourced from your former state may still be taxable. Rental income, pass-through business profits, or compensation earned while physically present in your old state can remain subject to its tax laws, even after you’ve moved.
  • Statutory residency rules can override your intentions. Many high-tax states enforce a “183-day rule” that may classify you as a resident if you spend more than half the year there, regardless of where you claim domicile.
  • Audit risk remains high for recent movers. States like California and New York have robust audit departments and may scrutinize your move closely, especially if you have a high income or keep ties like property, family, or business interests.
  • Documentation is your best defense. Keep organized records of your relocation, including travel logs, lease or deed agreements, utility bills, and updated licenses or registrations that demonstrate a full transition.

Red Flags That Could Trigger an Audit

State tax authorities look for patterns that suggest you haven’t really moved.

Watch out for these warning signs:

  • Keeping a home in your former state: If you keep property, turn it into a rental with a formal lease.
  • Spending lots of time in your former state: Especially during holidays or nice weather.
  • Still using doctors, dentists, and other services in your former state.
  • Keeping club memberships or professional groups tied to your old location.
  • Earning money in your former state but claiming you live elsewhere.
  • Social media posts that show you’re still spending lots of time in your old state.

Is Moving to a No-Income-Tax State Worth It?

Before packing up and moving, ask whether the tax savings are worth the effort and costs. Here’s what to consider:

When It Makes Financial Sense

  • You earn a good income: The higher your income, the more you can potentially save, dependent upon how else your target state makes money (higher property taxes, sales taxes, and so forth).
  • You have many working years ahead: Longer earning time means more lifetime savings.
  • You wanted to move anyway: If you’re already planning to relocate, a no-tax state could be the deciding factor. Especially when that move is international.
  • You can work from anywhere: Remote work makes tax-motivated moves easier than ever.
  • You’re worried about future tax hikes in high-tax states.

When It Might Not Be Worth It

  • You don’t pay much state tax now: If your current tax bill is small, the savings may not outweigh moving costs.
  • Most of your money comes from retirement funds or Social Security: Many states don’t tax these anyway.
  • Family ties make staying in your current location important.
  • Healthcare or other specific needs are better met in your current location.
  • Cost of living in your target state is much higher than where you are now.

Looking Beyond Income Tax: Other Tax Considerations

While income tax is important, it’s just one piece of your total tax picture.

Consider these other factors.

Sales Tax Differences

States without income tax often rely more on sales tax. Here’s how they compare:

  • Highest sales tax among no-income-tax states: Tennessee (7% state rate plus local taxes averaging 2.55%, for a combined average of 9.55%).
  • No state sales tax: Alaska and New Hampshire (though Alaska allows local sales taxes).
  • Middle-ground sales tax states: Texas (6.25% state rate plus up to 2% local), Florida (6% state rate plus up to 2.5% local).

Sales tax affects your daily purchases and can add up, especially if you spend a lot on taxable goods.

Property Tax Differences

Property tax rates vary widely among the no-income-tax states:

  • High property tax states: Texas (approximately 1.58% effective property tax rate) and New Hampshire (approximately 1.93% effective property tax rate).
  • Middle-ground property tax states: Florida (0.79%), Wyoming (0.55%).
  • Lower property tax states: Tennessee (0.49%), Nevada (0.50%).

For homeowners, this makes a big difference. For instance, the difference between Texas and Wyoming on a $400,000 home is approximately $4,080 annually. While states like Tennessee and Nevada offer lower property tax rates, it’s essential to consider other factors such as sales taxes, cost of living, and public services when evaluating the overall financial impact of relocating to a no-income-tax state.

Other Important Tax Factors

  • Estate/inheritance taxes: None of the eight no-income-tax states charges estate or inheritance taxes, which helps protect family wealth. (You may lose some to the federal estate tax however.)
  • Business taxes: Nevada taxes businesses with gross revenue over $4 million. Texas has a “margin tax” (otherwise known as a Franchise Tax) on businesses. Wyoming and South Dakota are very business-friendly.
  • Retirement income taxation: This is a big plus for retirees in no-income-tax states, as money from pensions, 401(k)s, and IRAs is completely tax-free.
  • Gas and excise taxes: These vary widely and affect your overall costs.
  • Future tax outlook: Look at the state’s financial health, debt level, and pension obligations as signs of possible future tax pressure.

What's Happening with State Taxes Now and in the Future

The landscape of state taxation keeps changing, and these changes matter for your wealth protection planning.

States Are Competing on Taxes

We’re seeing an unprecedented tax competition among states:

  • Tax cuts happening everywhere: In 2025 alone, several states cut their taxes, with Nebraska, North Carolina, and Mississippi reducing their income tax rates.
  • Flat tax trend: Iowa, Arizona, and Georgia recently switched from graduated income taxes to flat taxes, often as a step toward further cuts.
  • New Hampshire joining the club: The state just eliminated its interest and dividends tax, showing the pressure states face to improve their tax environments.
  • Heading toward zero: States like Mississippi and Iowa have said they want to eventually eliminate their income taxes completely.

This competition is good news for taxpayers, giving you more options for tax-efficient living.

Remote Work Has Changed Everything

The work-from-home revolution has fundamentally changed where people can live versus where they work:

  • Location freedom: High-earning professionals can now choose where to live based on taxes, not job location.
  • Second home considerations: For people with homes in multiple states, understanding “domicile” versus “statutory residency” has never been more important.
  • Companies are moving too: Major businesses continue to relocate to tax-friendly states, bringing jobs and talent with them.
  • States fighting back: High-tax states are developing new ways to tax remote workers who have left.

States Are Getting Smarter About Tracking Taxpayers

States are becoming more sophisticated in checking residency claims:

  • Digital footprint checks: Tax authorities now routinely look at social media, credit card transactions, cell phone records, and travel patterns during audits.
  • Information sharing: States are working together to identify inconsistent residency claims.
  • Automated systems: Computer programs help select audit targets, focusing on high-income taxpayers with recent address changes.
  • Longer lookback periods: Some states are extending how far back they can audit residency issues.

Is a No-Income-Tax State Right for You?

Moving to a state with no income tax can be a powerful way to keep more of your money, potentially saving thousands or tens of thousands of dollars each year. But doing it right takes careful planning to make sure tax authorities recognize your move.

The most successful moves share these features:

  1. Good preparation: Understanding both your new state’s requirements and your old state’s audit triggers.
  2. Complete implementation: Making a clean break rather than a halfway approach.
  3. Proper documentation: Keeping evidence of your intentions and actions.
  4. Lifestyle fit: Choosing a place that meets your needs beyond just tax considerations.
  5. Professional guidance: Working with experts who understand state taxation.

Before deciding, think about your financial situation, lifestyle preferences, and long-term goals. While tax savings are significant, they’re just one factor in choosing where to live.

Why Smart Tax Planning Is Key to Protecting Your Wealth

At The Nestmann Group, we often say: the most dangerous number in wealth protection is one — one country, one type of asset, or one strategy. And that’s especially true when it comes to taxes.

Moving to a state with no income tax can help you save money. But if that’s your only plan, you may not be getting the full benefit — and you could be putting your wealth at risk.

Go Beyond Just Changing States

Protecting your wealth takes more than just switching your state of residency. The real value comes when that move is part of a bigger strategy — one that includes:

  • Lowering your taxes legally in the US and abroad.
  • Protecting your assets from lawsuits or government overreach.
  • Planning your estate so your family keeps more of what you’ve built.

We’ve been helping clients build tax-smart plans like this since 1984 — always legal, always custom to your needs.

About The Author

Since 1984, we've helped high net worth American investors, entrepreneurs, and families go offshore. Our formula is simple: full-service programs for global investing, tax reduction, and second residency or citizenship -- so you skip the hard parts and keep the benefits. To learn more about how we can help you, please get in touch.

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As Featured on
The Washington Post
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